Has the COVID-19 pandemic been a turning point for Australian manufacturing?

Economic Sovereignty and Australia’s manufacturing resurgence

It’s taken the COVID-19 crisis to finally open the eyes of the Australian Government and people, that putting all your manufacturing eggs in one basket is detrimental to Australia’s economic sovereignty.

“Is the current scenario a turning point for Australian manufacturing?”  

Prime Minister Scott Morrison stood at the media pulpit on 8 April 2020,

“Today we act to protect our nation’s sovereignty…our sovereignty is measured in our capacity and freedom to live our lives as we choose in a free, open and democratic society…our sovereignty is sustained by what we believe as Australians, what we value and hold most dear, our principles, our way of doing things. Protecting our sovereignty has always come at a great cost, regardless of what form that threat takes.”

Australia’s efforts to acquire crucial medical and protective equipment needed to fight the COVID-19 pandemic has brought questions about our economic sovereignty to the fore, and raised concerns about the effect of globalisation on our manufacturing sector.

Manufacturing erosion

Australians have stood by as our manufacturing sector has been eroded and offshored by companies promising lower priced goods and increased profits for shareholders. We have turned a blind eye to the ethical considerations of foreign workers’ conditions and safety, and to environmental impacts, such as chemical discharge and water pollution, as they are not in our backyard. Western-like social class has seen the emergence of a fat middle class in China, at the expense of the impoverished poor who could hardly afford it in the first place.

The quest for growth continued unabated. Now we are paying a different kind of price.

Enter April 2020. The Dragon coughed and the world stopped. Like a family at Christmas, it wasn’t long before the hard questions hit the airwaves. Why are we, the lucky country, so reliant on one country to produce so many of our goods, a country we do not even have a strategic alliance with? A country that is unlikely to come to our aid in a crisis and that has been undermining all manner of South Pacific countries sovereignty?

How the current sentiment plays out, hopefully, won’t be as predictable as in the past. “Buy Australian” pride campaigns generally last as long as the first week of grocery shopping. Will consumers pay more for Australian-grown Ardmona tinned tomatoes when the imported Italian tomatoes (though arguably lesser quality) are cheaper? But maybe, just maybe, the Dragon’s Cough is a step-change for Australia.

The COVID-19 pandemic has delivered Australia a unique opportunity to ensure that the “Australian Made” logo and all that it stands for resonates with the community on a lasting basis. It is not right that we cripple our sovereignty at the behest of company profit, which is where we are at.

Is corporate Australia solely to blame?

So, does the responsibility belong with the corporates? Not entirely, they have shareholders’ money to babysit. Consumers? The stagnant wage increases over the last decade have eaten into the amount of money they have to spend. Keep spinning the “reason why wheel” and see what else turns up. There are many circumstances creating this result.

In looking for ways to support Australia’s post-COVID-19 economic recovery, Federal and State Governments have an opportunity to partner with private enterprise to reinvigorate and rebuild the Australian manufacturing sector.

One important step would be taking a leaf out of Defence Industry contracts. The contracts have a risk component factored in whereby a percentage of local Australian suppliers must be included. This is to ensure that Australia has the capacity to supply products in times of conflict.

Graeme Dunk spoke of this in his address at the launch of Industry Voice at Parliament House on February 6, 2020 when he referred to rebuilding domestic capability towards having a sovereign capability. The time has never been better to adopt these measures in other crucial areas, health-related products being an obvious one.

So now to Australia’s manufacturing resurgence

The nature of manufacturing has changed significantly in recent years. Industry 4.0 relies on smart and autonomous systems fueled by data and machine learning. China has anticipated this, boosting postgraduate numbers in the artificial intelligence field to further their research capabilities in this area. 

Australian manufacturers now also have an opportunity to use Industry 4.0 technologies to optimise their operations and boost their competitiveness. Despite our (relative) isolation on the global stage, Australia is a logical place to manufacture some things. Products that are small run and intended for the local market; or too expensive to transport to our market in its manufactured form; or that leverage a uniquely Australian or “clean, green” angle, especially when intended for an export market.

Now more than ever, it is time to stand on our own two feet; and manufacturing has an opportunity to be the cornerstone of this. Why wouldn’t we look at our defence allies, such as New Zealand or the United States, to form a manufacturing and supply-chain alliance?

This is not about beating up on China. It’s about choosing our partners. Our strength as a country relies heavily on our mineral and agricultural wealth The world wants to be our friend. The US knows what lies beneath the sea and the soil down here, as does China. Do you think the US would have little ol’ Australia so close to them if that wasn’t the case? China’s attempt to love up the South Pacific is likely not driven by altruistic motives.

We expect the world’s reaction to China after the COIVD-19 to be driven by mistrust. It will be isolationist. The world is already demanding answers and much more detail about the origins of this pandemic and how it was handled by China. Right on cue, Beijing introduced trade barriers against Australia in immediate retaliation to our Prime Minister’s calls for an independent investigation into the pandemic.

As the Prime Minister continues to navigate the country through the health and economic effects of the pandemic, we must remember that he is merely our elected leader, charged with the responsibility of charting Australia’s road to recovery.

Resurrecting Australian manufacturing relies on businesses and Governments at all levels working together to build manufacturing alliances and to give the Australian manufacturing sector a renewed focus. Whatever the cost. Sovereignty is the not-negotiable contract for national integrity.

So how can we boost our manufacturing capability? 

We need a strategic analysis as to how our businesses can and will compete in world markets, where we can leverage our competitive strengths, and enhanced Government support to drive our manufacturing agenda and reinvigorate ‘Brand Australia’ in the domestic and international markets.

We need to identify and break down barriers that stand in the way of Australian manufacturing – to clear the way to allow innovation, development and production to flourish.

We call on the Government to to tread carefully to protect workers’ rights but look to provide greater industrial relations flexibility. Reduced red-tape allows innovation (look at how restaurants and bars have reinvented themselves when allowed greater freedom to do so). Toyota Australia opted out of manufacturing in Australia (at least officially) due in no small part to combative industrial relations. Executive Chairman John Conomos, a 30 year Toyota veteran, could understand the Company’s frustration at union resistance to changing workplace entitlements and practices. This union obstruction, it was said, gave Toyota little option but to shut down manufacturing in Australia.

Further Government support for innovation, such as tax incentives or grants, will also assist local manufacturing, with innovation and development enabling improved quality and lower costs. Increased investment in STEM education and skills training is also needed to boost Australia’s capability to meet the needs of Industry 4.0 and support a smarter manufacturing sector.

The COVID-19 pandemic has highlighted our dependence on overseas-produced goods and exposed the need to reinvigorate Australian manufacturing. Let’s use this opportunity to resurrect our manufacturing capability, trade on Brand Australia’s clean, green image, and realise sustained profits for our value-added capability, not just our mineral resources.

The Prime Minister clarified his reference to “economic sovereignty” the following week, when he said it was “not an argument for nationalisation”, but about ensuring that Australia “can have profitable, competitive, successful industries in Australia … and the right policy environment to support that”.

So it sounds like he’s already thinking about how we can work together to make Australia make again. We say “bring it on!”

For more information please contact Bridgepoint group on 1300 656 141 or email us info@bridgepointgroup.com.au