Stop blaming wages and power bills. Here’s what’s really holding back Australian manufacturing

Tropes about high costs don't tell the whole story when it comes to making things in Australia. Those aren't the real reasons why the industry's share of GDP is so low, explains Dominic Parsonson.

Manufacturing isn’t a “nice to have” for Australia, it’s a pillar of growth, resilience and national security. Yet whenever we talk about rebuilding the sector, the debate collapses into two tropes: “our wages are too high” and “our electricity is too expensive.” That’s not the whole story.

The numbers don’t support the usual excuses.

If high wages and energy prices decided manufacturing destiny, Germany and France would have tiny manufacturing sectors. They don’t. In 2024, manufacturing value-add was ~17.8 per cent of GDP in Germany and ~9.4 per cent in France versus ~5.5 per cent in Australia. High-income peers sustain far larger manufacturing bases than we do.

Yes, energy prices have been volatile. But volatility ≠ inevitability. Australia’s market has seen both spikes and declines over 2023–25; the real lever is how quickly firms invest to reduce energy intensity and capture efficiency gains, something our system can influence and support.

What Australia’s best manufacturers do differently

Across the 18 years that I have lived here, the standout companies I’ve seen share a playbook:

• Invest in advanced manufacturing and process technology, including automation, digitisation, and quality systems, to ensure they’re globally competitive in terms of cost, quality, and lead time. Global robot density hit a record 162 robots per 10,000 workers in 2023, according to the International Federation of Robotics. Australia’s adoption has lagged since automotive exited, and that gap matters.
• Sell to the world, leveraging “Brand Australia” (reliability, quality, safety) and scale economics from exports.
• Tell their story to customers, partners, talent and the press, so they attract better suppliers, recruits and investors.

The real blockers (and what we control)

Here are the issues we can fix, backed by the evidence:

1. Slow diffusion of proven tech Australia doesn’t have a “frontier innovation” problem as much as a diffusion problem—getting existing, effective tech (automation, digital, lean) into the other 98 per cent of firms. That’s the Productivity Commission’s language, not mine. (credit: Productivity Commission)
2. Capital access that doesn’t fit manufacturing. The RBA notes access to finance remains difficult for many small businesses; lenders often require personal property as collateral, and many SMEs self-fund growth—an especially bad match for equipment-heavy manufacturing. (credit: Reserve Bank of Australia)
3. We underuse the “Brand Australia” advantage. Australia ranks Top-10 globally on the Anholt-Ipsos Nation Brands Index—an export superpower we can co-brand with to open doors offshore. (credit: Austrade Brand Australia)
4. Fragmented adoption support There are strong programs but many firms don’t know how to stitch them together into a finance + capability + market pathway.

Policy and program scaffolding you can use now

• National Reconstruction Fund Corporation (NRFC)—$15b to finance projects in seven areas: Resources value-add, Transport, Medical science, Defence capability, Renewables & low-emissions tech, Agriculture/forestry/fisheries value-add, and Enabling capabilities (e.g., robotics, AI). National Reconstruction Fund
• Future Made in Australia (FMiA)—legislation passed, including production tax credits for renewable hydrogen and critical minerals. If you sit in these supply chains, align your investment roadmap accordingly. IEA
• Industry Growth Program (IGP)—advisers + matched grants focused on commercialisation and growth for SMEs, aligned to NRF priorities. Great fit for pilot lines, process automation and first-export readiness. Industry.gov.au
• CEFC-backed asset finance—discounts on loans for energy-saving upgrades that often improve unit economics immediately. Clean Energy Finance Corporation
• Export Finance Australia (EFA)—project/structured finance and working capital for exporters; useful when banks won’t underwrite scale-up risk. Export Finance Australia

For editors and investors (we need you, too)

• Editors: Spotlight manufacturing wins (productivity, quality, export stories). The evidence says diffusion is the bottleneck, coverage accelerates it. Productivity Commission
• Investors and banks: Modernise credit models for equipment-heavy SMEs (value machinery, contracts and energy savings, not just property). The RBA’s data shows why old models screen out promising manufacturers. Reserve Bank of Australia

Bottom line

Yes, governments should do more, but we also have to take responsibility for ourselves.

I have visited and spoken to people at Australian success stories that 90 per cent of you have never heard of, for example Trajan Scientific and Medical Garden City Plastics and Nuttelex. These companies innovate, and invest in technology and they are successful, we should seek to emulate these companies.

Australia’s manufacturing share isn’t low because our people are well paid or because the grid is impossible. It’s low because we’ve been slower to adopt, finance and scale the capabilities that make high-wage manufacturing competitive.

The good news? Those levers are in our hands, and the policy scaffolding to pull them already exists, but we should not let up on the pressure we apply to Federal and State governments; we should not let up on the pressure we apply to our Superannuation funds and Investors. The manufacturing journey is the responsibility of all Australians.

This article was first published on Linkedin. It has been reproduced with permission. You can read the original version here.