Analysis and Commentary

Can Industry 4.0 rescue Australia’s sovereign manufacturing capability?

Analysis and Commentary

Australian manufacturers need to capitalise on the opportunities presented by Industry 4.0 or be left behind, warns Martin Ripple.

As governments around the world embrace the fourth industrial revolution, also known as Industry 4.0, Australia is at risk of being left behind after decades of government neglect of the nation’s manufacturing centres.

Sadly, I’ve seen firsthand successive governments fail Australian manufacturing, which has been in terminal decline since its peak in the 1970s, while other sectors of the Australian economy have fared much better with continued political support and beneficial legislation.

The decline of the manufacturing sector was put into stark perspective during the COVID-19 pandemic as global supply chains ground to a halt, and the economic cost of relying on overseas supply chains continues to be felt by everyday Australians.

With ongoing geopolitical tensions impacting our region and many experts warning future pandemics are inevitable, the vulnerabilities in Australia’s sovereign capabilities need to be corrected, or there will be more pain for families and the Australian economy.

Compared to other OECD countries, Australia has the highest dependency on manufactured imports and the lowest level of manufacturing self-sufficiency.

In this new global environment, sovereign capability really matters. We can no longer be reliant on a handful of countries for the majority of our products. The decay of Australia’s manufacturing sector needs to stop.

Manufacturing was the largest employer in Australia in the 1980s, accounting for 16.5 per cent of the workforce. Now less than 1 million people work in the sector, accounting for just 6.4 per cent of the workforce.

Just in the last decade, the offshoring of Australia’s automotive sector saw companies close their doors forever and 40,000 jobs disappear.

While traditional manufacturing jobs are unlikely to return to our shores, the rise of Industry 4.0 and smart automation provides a new opportunity to revive Australia’s manufacturing sector.

However, ongoing neglect of Australia’s manufacturing sector over the past decade means the country is already behind the competition when it comes to capitalising on the opportunities presented by Industry 4.0.

Meanwhile, governments in Europe, the US and Asia have been heavily focused on future-oriented manufacturing and ensuring companies embrace Industry 4.0 opportunities to their full extent.

These supportive policies are allowing such nations to rapidly expand their domestic manufacturing capabilities, slashing reliance on long supply chains by onshoring production and creating jobs. At the centre the revival of manufacturing in these countries is smart automation, improving cost competitiveness, productivity and quality.

Automating manufacturing is not about replacing people but transforming the existing workforce to perform more critical and complex tasks, while simultaneously helping contribute to wage growth and addressing the growing skills shortage.

While other countries are capitalising on Industry 4.0, Australia’s manufacturing industry continues to wallow in continued uncertainty.

While the Government’s $15 billion National Reconstruction Fund (NRF) has the potential to be a game changer and revitalise the industry, it has been disappointing to see it held up in the Senate by bureaucratic red tape and party politics.

Both sides of politics championed the importance of reviving Australian manufacturing during last year’s election, but recent developments cast doubt on the commitment to this cause by some in Canberra.

Even if the NRF gets over the line, simply throwing money at the sector will not be enough to ensure its longevity, as the automotive industry showed us.

There is no point providing funding to scale up industry if there is not enough work to sustain it, which is why there also needs to be a strategy to ensure the sector’s long-term success.

I believe serious opportunity lies within the evolving defence and aerospace sectors, but it will take leadership from the Federal Government and industry to capitalise on the billions of dollars in opportunity these sectors offer.

It is within the Government’s remit to mandate local manufacturing as part of the defence procurement process, which could be a necessary boon to boost our sovereign capability.

The current issue is Australian manufacturers lack both scale and capacity to be primary contractors under current defence contracts, which tend to be awarded to international competitors.

Current projects are akin to taking a sip from a fire hydrant; they are far too big and complex for local suppliers.

If this Government is serious about reviving Australian manufacturing, then a strategic plan to develop local champions that can operate at a global scale needs to be developed.

There is scope for serious discussion around this as the international aerospace and defence communities gather in Victoria at the end of the month for the Avalon Airshow.

The groundwork is already in place, with the Australian aerospace manufacturing industry known for its high-quality products and expertise in niche areas such as unmanned aerial systems, built on the back of strong research and development.

However, Australia’s manufacturing capabilities in the sector pale in comparison to other countries such as the US, France, UK, Germany and Canada.

If Australia is to compete against these already established global heavyweights, it needs the policy to support its ability to scale up, or risks seeing expertise continue to leave the country, further eroding the nation’s sovereign capability.

It is time for Australia to move from niche to mainstream and capitalise on the opportunities of Industry 4.0 or be left behind.

This article was originally published on Linkedin. It has been reproduced with permission.

Martin U. Ripple is CEO ANCA Group. 


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