Greater collaboration with industry and better economic policies that foster productivity will be key concerns for the Australian Public Service under the federal government’s $1.5 billion modern manufacturing strategy.
Unveiling the strategy at his National Press Club address on Thursday, Prime Minister Scott Morrison said the government must understand that the success of Australia’s manufacturing sector would “depend on broader economic policies that support greater productivity”. He said such policies included affordable and reliable energy, lower taxes, industrial relations changes, training and skills development, cutting red tape, and infrastructure investment.
“Too often in the past, industry policy has ignored these foundational elements in the vain hope that isolated programs subsidies and workarounds could make up for the broader deficiencies in the broader economic policy settings,” he said.
“We also need to get more targeted and apply greater discipline to how we invest in these sectors as a government. It must be part of longer term planning.”
The strategy, announced in the lead up to the federal budget next week, has three components:
- Create a business environment where manufacturers can be more competitive;
- Align resources to build scale in areas of competitive strength; and
- Secure sovereign capability in areas of national interest.
In regards to the first component, Morrison argued that creating a competitive domestic gas market would be essential to supporting manufacturing, which is unsurprising considering the government has been pushing the idea of a gas-led economic recovery for months.
“If you’re not for gas, you’re not for manufacturing and heavy industry in this country, and the jobs that they support. For many manufacturers, gas is half the problem that they confront. And that’s why reforming that sector is so foundational to the achievements we hope for in the manufacturing sector,” he said.
In order to build scale in areas of competitive strength, Australia “cannot and should not seek to reach global scale”, Morrison argued.
“In a large number of sectors, we can’t be all things to all people,” he said.
“It is all about alignment across levels of government with industry and with research and education sectors, and siloed programs don’t work.”
That is why the government has identified six national manufacturing priorities in areas of “established strength and emerging priority”:
- Resources technology and critical minerals processing;
- Food and beverage manufacturing;
- Medical products;
- Clean energy and recycling;
- Defence industry; and
- Space industry.
With those priorities in mind, the government plans to partner with industry to co-design roadmaps “geared to build scale in each area”, which Morrison said would be finalised by April next year.
“These industry-led roadmaps will identify growth opportunities barriers to scale and required actions along the entire value chain in each of our priority sectors. They will guide future investment and action from both government and industry, getting that alignment,” he said.
“The roadmaps will set clear goals and performance indicators so how many more jobs, what level of r&d, how much more investment. So we can track it over the next two, five, and 10 years where appropriate.”
The Industry Innovation and Science Australia board will also be “refocused and refreshed” to perform a key advisory role under the continued leadership of Andrew Stevens. Industry minister Karen Andrews will announce appointments to the board in the coming weeks.
Touching on the third goal of securing sovereign capability, Morrison said it’s “only sensible” that the government consider more options to guard against supply chain vulnerability, and would invest $107 million in a new supply chain resilience initiative.
“This will support Australian manufacturers investing in capabilities to address areas of identified acute vulnerability domestically, and to ensure they are in a position to contribute to the supply chains of trusted partners and like minded countries,” he said.
Sovereign manufacturing capability plans would consider a range of policy options, including procurement and long-term contracting arrangements, and “actions to promote better information sharing and collaboration between government and industry”.
During his address, Morrison said “pretensions of protectionism as a viable strategy for domestic manufacturing” were long gone. When asked whether he considers government procurement protectionist, Morrison said government procurement policies comply with World Trade Organisation rules.
“You have to balance your ambitions as an open, trading nation and you do that by respecting those rules and playing your part in upholding those rules, and modernising those rules, which we’re doing. At the same time, understanding that we have a great opportunity through how we procure as a country, whether it is in defence or anywhere else,” he said.
“I mean, I was advised today that 95.7% by volume and 91.6% by value of the contracts awarded by the Australian government in 2018-19 were to businesses with an Australian address.
“That has been assisting, supporting, modernising, energising Australian small and medium-size businesses around the country. You abide by the rules, and that’s what the rules are designed to protect against — that is against protectionism. If you comply, well, I think you’re in the right spot. That is where we find ourselves.”