As the year draws to a close, Industry Minister Ian Macfarlane discusses the major issues facing Australia's manufacturing industry with Manufacturers' Monthly's Editor-at-Large, Alan Johnson.
Johnson: The latest industry reports show Australia's manufacturing industry is still in negative territory, how do you see this trend ending?
Macfarlane: Industry in Australia is undergoing a significant transition, just as it has done in other developed nations. In the ten years from 2003 to 2013, sectors including agriculture and manufacturing have been declining in terms of their share of GVA and their share of employment.
During the same period business services and professional services have shown the greatest increase in their share of these same measures.
From an economy that was historically built around farming and agriculture, through to heavy manufacturing and commodity based industries that have been the mainstay of our economy in recent decades, Australia is now on the cusp of a third wave – the transition into higher value-added industries that are based on innovation, research and the sophisticated skills base of our workforce.
By addressing the cost of red tape, lowering the company tax rate, and putting in place a framework to encourage investment in growth sectors, the Government is working to improve the competitiveness of Australian manufacturers by lowering the costs of running a business in Australia.
The Australian Government's Industry Innovation and Competitiveness Agenda will address industry competitiveness through:
· a lower cost, business friendly environment with less regulation, lower taxes and more competitive markets;
· a more skilled labour force;
· better economic infrastructure; and
· industry policy that fosters innovation and entrepreneurship.
Johnson: Last year, when I asked about gas supply, you mentioned an acreage system, where some of the gas from future projects could be set aside for domestic use. How would the system work, and is it still on the agenda?
Macfarlane: The Australian Government is preparing the Energy White Paper to set a long-term policy framework for the energy and resources sector.
One of the areas the White Paper will focus on is developing Australia's future energy sources, including gas.
The Australian Government does not support a retrospective, mandatory gas reservation policy. However, it is still the case that State Governments may wish to consider proposals whereby some gas from future projects, not existing projects, could be used in the domestic market.
Ultimately these questions relating to onshore gas are for State Governments to address.
The Commonwealth will continue to provide a broad energy policy framework for all energy matters through the Energy White Paper process.
Johnson: Australian manufacturing is currently classified by the OECD as being in the 'medium-low and low technology' category of nations, based on its R&D spending as a share of total value added. What plans does the Coalition have to change this situation?
Macfarlane: While Australian manufacturing is the largest performer of business R&D, accounting for a quarter of total annual business R&D expenditure, there is more that can be done to transform manufacturing towards higher value added outputs.
The Government is putting in place the policies and programmes that will provide incentives for manufacturing firms to invest in technology, and research and development, in order to foster a viable, competitive and successful manufacturing industry.
Through the $188.5m Industry Growth Centres Initiative, the Government is targeting five growth sectors in which Australia has competitive advantage as a priority:
· Food and Agribusiness;
· Mining Equipment, Technology and Services;
· Medical Technologies and Pharmaceuticals;
· Advanced Manufacturing; and
· Oil, Gas and Energy Resources.
Growth Centres will bring business and research together to boost productivity and create jobs by turning ideas into profitable products and services, reducing red tape and lifting workforce skills.
Johnson: With our car makers set to close their factory doors very soon, how optimistic are you that component suppliers will be able to find new markets and/or transition into new markets?
Macfarlane: It is important that our car component makers diversify their businesses to take advantage of opportunities in the growth sectors of the Australian economy.
The Government's $155m Growth Fund supports initiatives to assist automotive workers transition to new jobs, businesses find new markets and invest in capital equipment.
A key element of the Growth Fund is the $20m Automotive Diversification Programme (ADP), which will provide assistance to Australian automotive supply chain companies to diversify out of the domestic motor vehicle manufacturing sector through investment in capital equipment and thereby retain manufacturing capability in Australia.
Johnson: Commentators talk of the need to move to "Advanced manufacturing" and/or "High-Tec manufacturing", but how do you see this occurring?
Macfarlane: The Australian Government is creating the right environment for accelerating Australian manufacturing's transformation into a knowledge-intensive and globally competitive industry.
The new $50m national Manufacturing Transition Programme, the first round of which opened in September, is forward-looking and aims to support capital investment projects which help businesses transition or expand into higher value or niche manufacturing activities, and build skills in higher value and knowledge intensive manufacturing activities in new or growing markets.
In addition, the Advanced Manufacturing Growth Centre will drive innovation in our manufacturing sector by leveraging off Australia's great research capabilities.
[Alan Johnson is Manufacturers' Monthly's former editor. He has researched and written about all aspects of the Australian manufacturing sector for over 25 years.]
Image: Glenn Hunt/Fairfax