COVID-19 has provided the disruption needed to change thinking around Australian manufacturing, Federal Minister for Industry, Science and Technology Karen Andrews said in her National Press Club address (20 May).
Andrews said the disruption to global supply chains has been a wake-up call for many businesses, with norms disrupted and a shift in priorities and consumer sentiment.
Many businesses faced massive supply chain disruptions because they were dependent on product from overseas, whether it was finished goods, raw materials or supply inputs. It meant there had been a “significant” wake-up call to diversify supply chains.
“They now understand that they need to diversify their supply chains. They need to look at what they can procure locally. Not only did they have difficulty sourcing product, but they had extreme increases in the price of freight and difficulties getting that product here to Australia. That has led to a significant rethink by many businesses.
“Many businesses have already said to me that they are looking at how they can source products in Australia, how they can look at shoring up supply chains, how they can look at diversifying their supply chains. There has been a significant difference, and we can look forward to some significant changes in Australia's manufacturing sector,” she said.
Manufacturing revisited
The pandemic has honed what needs to happen now, that by building an even stronger local manufacturing sector means securing our economic sovereignty.
For Andrews, Australian manufacturers have displayed incredible ingenuity, resilience and collaboration in meeting the difficult challenges of responding to COVID-19, citing the work done by Foodmach and Detmold in pivoting to manufacturing personal protective equipment proving their work as “vital”. She also mentioned food and packaging manufacturers who had ramped up production to meet demand.
“Perhaps their willingness to adapt and change is a reflection of the fact that manufacturing has faced its own existential challenges over many decades.
“They’ve had to pivot so many times to meet the needs of a rapidly changing Australia.
“While the decline of the car industry has attracted media headlines, the fact is that many other sectors have been succeeding and growing in recent years.
“For example, food and beverage manufacturing has had 11 quarters of consecutive growth. We are very good and well-regarded food producers. About twenty-five per cent of our manufacturing is food based so we have enormous opportunities to value-add along the way with our food. Many of our nearest neighbours, in particular, are very interested in not only our meat, processed meat products, but also what we can do with our cropping to produce processed goods. Food creates a real opportunity for us to continue.
“I refused to accept the advice that Australian manufacturers would only be able to fill small gaps in supply. Capability exists in this country. What was needed was a change in the culture of how we think about our capability, about how we challenge the status quo.
“Frankly, what we needed was disruption. Because, when they were called on, our manufacturers stepped up to deliver.”
Andrews said the building blocks for the sector were “complex and deceptively simple”:
- Cheaper gas and electricity;
- A highly skilled workforce;
- Better alignment of Government services and reduced red tape;
- Greater collaboration between research and industry;
- Support for more good ideas to be commercialised;
- Improved access to export markets, especially for small and medium enterprises;
- And underpinning it all - lower taxes and a stronger economy.
“This is not about re-creating the past, or re-living a golden era. It’s a newer, richer and more highly developed industry that we’re cultivating,” she said.
“While COVID-19 has brought issues such as sovereign capability to the forefront and, frankly, exposed gaps in our manufacturing, I am not suggesting that complete self-sufficiency should be our goal. There are many things Australia won’t and shouldn’t be making.
“But it is clear we can’t just rely on foreign supply chains for the essential items we need in a crisis. We can’t supply all our wants locally but we have to be able to supply, or at least pivot our production processes to produce the goods we need.
“And we have to compete on value, not on cost.
“More broadly, as I’ve said before, we need to identify our areas of both comparative and competitive advantage. Our key sectors of comparative advantage could include our mining and agriculture technologies, critical minerals processing, and food and beverage manufacturing.
“Our areas of national priority might include pharmaceuticals and med-tech, defence, energy technology, the emerging space industry and waste and recycling.
“And of course, a developed advanced manufacturing capability is an enabler for all of these sectors.”
Groundswell for home grown
For Andrews, consumer sentiment will ultimately encourage businesses to seek a higher proportion of inputs through domestic supply chains. “The disruption in global supply chains has been a wake-up call for many businesses,” she said.
“I know a number of businesses are actively looking at boosting local procurement because they know many Australian consumers are planning to closely examine their own purchasing decisions in the future.
“I sense a groundswell of community support for Australian-made products, which is good news for local manufacturers.
“A return to quality over quantity. This sort of disruption would indeed be a great opportunity for Australian manufacturing to compete on value, not cost.
“It’s also important to recognise that our manufacturing sector has evolved and looks very different to what it did 30, 20 or even 10 years ago.”
AFGC welcomes minister’s comments
The Australian Food and Grocery Council (AFGC) welcomed Andrews’ comments confirming the strengths of Australia’s food, beverage and grocery manufacturing sector. The $122.1 billion Australian food, beverage and grocery manufacturing sector is the biggest manufacturing sector with 273,000 jobs and is a backbone to regional Australia.
AFGC Acting CEO Dr Geoffrey Annison said: “Whilst the supermarkets kept their doors open, it was the food and grocery manufacturers and suppliers working around the clock 24/7 that stepped up to keep their shelves stocked with the essential products needed by Australians week after week during the COVID-19 crisis.”
Annison, said that while Australia makes safe, nutritious food here and enough for 75 million people, it also value adds to the raw commodities from farms that get sold to the world. “Our exports are worth nearly $35 billion with a strong import trade as well bringing in ingredients to add to the products we make here.
“Manufacturing is alive and well in Australia and with the support from the federal government through either reducing red tape, short term incentives and allowances and helping business to navigate new markets, we have had the confidence and ability to remain strong during the COVID-19 crisis,” Annison said.
“While this sector is vital and strong, the AFGC will work with government to shape the future landscape for manufacturing in Australia as laid out by Minister Andrews. Building competitiveness is a priority especially as global competition is likely to be fierce as other countries look to Australia as a potential market for their industries, and will not hesitate to take share from Australia in export markets.”
