Analysis and Commentary

Reset manufacturing, but with the right IR settings – by Michael Stutley

Analysis and Commentary

Australia has a rare opportunity to reset its manufacturing sector. But it must get the IR settings right argues Michael Stutley.

Since the 1960s peak, Australian manufacturing has been in decline.

In the protected economy of that period, it generated over a quarter of GDP and employed about 25 per centof the workforce.

Today, manufacturing’s share of GDP has shrunk to about six per cent and the employment numbers reveal a similar statistic, with its nadir being the exit of the three car manufacturers, Ford in 2016 and Toyota followed by Holden in 2017.

Its fall from grace largely reflects a free-trade mentality – especially among Canberra’s economic mandarins and sections of the media – that sees industry policy as shorthand for protectionism.

Almost by osmosis, free trade has become the accepted economic orthodoxy.

Yet poll after poll shows Australia wants a manufacturing industry, even if it means higher prices – a public sentiment that intensified during COVID when our vulnerability to imports during a global pandemic became self-evident.

Certainly, politicians have detected this public mood.

To much fanfare in 2020, the former Coalition Government announced the $1.3 billion Modern Manufacturing Initiative and the six National Manufacturing Priorities – minerals, food, medical, clean energy, defence and space.

Labor got into the act with its “A Future Made in Australia” policy to revitalise manufacturing, what it says is ‘a comprehensive plan to create jobs, boost vital skills by investing in education and training, bring industry expertise back onshore and supercharge national productivity’.

A key element is a $15 billion National Reconstruction Fund with $1 billion allocated to businesses in resources value-adding and mining science and $1 billion towards advanced manufacturing.

Prime Minister Anthony Albanese is, in my opinion, on the money.

Let’s be a country that makes things again. Not just because we can value add. Not just because it provides us with supply chain security.

But because it provides vast opportunities, starting with skills development, meaningful careers, and improving our balance of trade.

Coming from Western Australia, I believe that resurrecting manufacturing via our abundance of minerals is a sustainable option.

For too long, we have shipped our natural resources offshore only to be sold back to us at a premium. For example, Australia has its own lithium and zinc reserves – key battery ingredients.

Why not add value to these minerals instead of importing batteries.

It means we need to be smarter. We have the raw material, the know-how, a trained workforce, and the educational institutions to ensure future employees are equipped with the necessary skills.

If politicians need another reason, let me assure them – it’s politically popular.

This is not an argument for the tariffs and quotas of yesteryear; Australia will never have labor-intensive textile, footwear and clothing industries again.

It is an argument for a coordinated and targeted national industry policy with a long-term vision as opposed to a short-term, pork-barrelling approach.

Avoiding the latter will be critical. History tells us when taxpayers’ money is in the offing, when certain projects get prioritised, the result is often bad work practices, industrial relations mayhem, and low productivity.

So, the big question is – can we get the industrial relations structure right that will encourage investment, ensure profitability, and generate shareholder returns.

To my mind, we need serious policy that:

  • Supports skilled migration to kick start our minerals industry to ensure we stay ahead of the pack in renewable energy
  • Provides certainty to employers and employees in the form of a base minimum of wages and standards – not from an award perspective but think base wage combined with productivity / bonus payments / profit share that give employees a sense of ownership and pride in industry
  • Removes complexity from the awards and restores enterprise level relationships from a fair and sustainable base. Provide the environment for supply and demand to drive contract level negotiations
  • Increases training and development opportunities to build tomorrow’s skilled workforce
  • Is supported by a bipartisan political approach to provide certainty rather than political ammunition
  • And sustains industry in regional Australia.

So, how can Labor achieve this? True to form, we are having another summit, this time the Australian Job Summit.

Labor says it will inform a White Paper on full employment, and, no doubt, with a revitalised manufacturing sector being a big part of this.

But we know from experience that summits are typically reserved for the few: unions, government, and business industry bodies.

This is a good start, but to my mind we need businesses, investors, and, if possible, employees at the table.

We need those who will be at the coalface in this march towards renewables, resource development and manufacturing, to be able to air their views. They know, better than anyone, what’s required.

This is our chance to have a summit that counts, that leads to an industry policy that pays equitable wages, ensures capital investment, generates earnings and allows for investment returns.

For 50 years, Australian manufacturing so slowly contracted in importance.

Today, the political will, endorsed by public sentiment, is creating an environment for a manufacturing renaissance. Let’s not waste it.

Michael Stutley is a Perth-based Partner at Australia’s largest national specialist workplace law firm, Kingston Reid. He has worked in employment, safety and migration law for more than a decade in industries as diverse as manufacturing, construction, mining, maritime, mining, aviation, immigration and health care.

Picture: Michael Stutley

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