A report has shown how the COVID-19 pandemic could reshape the Australian manufacturing scene, with the sector calling on government incentive to spur activity as part of its recovery plan.
The data comes from a report from the ABC who says that since the 1980s, where Australia’s manufacturing sector employed around 16.5% of the population, which in 2020 has shrunk to just 6.4%.
In addition, manufacturing’s share of Australia’s GDP has fallen from 30% in the 1950s to 6% of GDP in 2019. While other developed nations often produce an excess of goods that they consume, Australia on the other hand produces just two-thirds of the amount of goods it consumes.
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This has led a number of key thinkers in government, industry and academia to call on a reawakening of Australia’s manufacturing scene, as the government looks to recover the economy post-pandemic.
Analysis from the Australia Institute’s Centre for Future Work shows that compared with OECD competitors, Australia has one of the least self-sufficient manufacturing scenes.
“Most other industrial countries have manufacturing sectors that are successful and large enough to, in aggregate, meet their own domestic needs for manufactured products,” Jim Stanford, Director of the Centre for Future Work said.
“In Australia’s case, however, we’re using more manufactured goods all the time but we’re producing a smaller and smaller share of those. Australia has one of the most underdeveloped manufacturing sectors of any industrial country in the world,” he added.
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“I think there is a mistaken assumption that if you’re a rich, high-wage, industrial country you just can’t do manufacturing. After all, it’s much cheaper to do things in China or Thailand or some other low-wage country.”
“We found that traditional assumption is absolutely false,” Stanford said.
With import and export markets thrown into disarray with the pandemic, it’s possible that Australian manufacturing could witness a resurgence as organisations attempt to build a local supply chain that is less vulnerable to international market disruptions.
Dr Stanford is advocating for the government to take the manufacturing sector into account as it plans for a post-pandemic future. He says that increasing Australia’s manufacturing self-sufficiency to 100% would add around $180 billion in new manufacturing output, add $50 billion to Australia’s GDP and employ more than 650,000 workers.
“I think it’s a pragmatic and ambitious goal to try and rebuild manufacturing in Australia back to a level that’s comparable to our own need for manufacturing.”
Research shows that the majority of the 926,000 employed in the manufacturing scene are working for small to medium-sized enterprises – SMEs – with less than 20 employees.
“We’ve gone from being a very significant employer to less than a million people now,” Vonda Fenwick, Chief Executive of the South East Melbourne Manufacturers Alliance (SEMMA) told the ABC.
SEMMA is putting pressure on the federal government to provide incentives to spur economic activity in the manufacturing sector.
“If you look at any economically successful country in the world, you’re looking at a country that’s got a healthy, robust, industrialised sector, you’ve got a country that’s manufacturing.”
“It simply makes sense for us to be really sticking to those policies, making sure that we’re buying locally, making sure that we are mandating local content requirements to ensure that we’re providing work for manufacturing,” she said.
Dr Stanford made the example of Australia’s vast mineral reserves, stating that it was a lost opportunity of sorts to export them, rather than use them in manufacturing goods.
“Once again, we’re limiting our horizons to just digging it out of the ground and then sending it to other countries, to then manufacture it into these value-added products that we then import back from them,” he said.
“Lithium is worth about USD $750 a tonne in its raw form, but, if we actually manufacture it into batteries, that same amount of lithium would be worth about $150,000.”
“About two-thirds of all word trade consists of manufactured products, so if you don’t have a strong domestic manufacturing base, you’re shutting yourself out of most world commerce,” Stanford concluded.