Though the general consensus is that Australian manufacturing is experiencing a downturn, Steven Impey looks at the country’s export statistics, which tell a different story.
Back in June, senator Nick Xenophon stressed to an industry summit in Canberra that Australia’s manufacturing sector had shrunk by roughly 12 per cent in the past 10 years.
That’s a substantial portion of the workforce and widely considered to be the result of the offshoring of Australian labour.
Now consider this: in the same time, the revenue produced through the industry’s international supply chains has inevitably slowed – but by only one per cent.
That is according to an industry breakdown of statistics supplied by the Australian market data expert IBIS World, as requested by Manufacturers’ Monthly.
To put this into context, the demise of the automotive assembly sector more than halved an export sector once worth $4 billion between 2007 and 2017.
While the industry fears it has not experienced the full brunt closures to the Holden and Toyota factories will bear in the years to come, Australia is still exporting more than $101 billion worth of manufactured goods annually. The industry, by all means, is plugging the gap with alternative innovation.
Arguably, the nation should hope to have achieved more in that time while it is still riding a commodity wave.
Nonetheless, there are sectors out there that are taking advantage of a more connected world. The revenue created from exporting processed meats alone has grown by almost $3 billion.
Meanwhile, smaller sectors such as the paper manufacturing industry broke the billion-dollar threshold in 2014.
Abetted by investment in the defence industry, Australia’s procurement for international shipbuilding has also seen the sector grow from a low of $26 million in 2007, to more than $400 million eight years later.
Though demand for different products will continue to yo-yo, it proves Australia is still doing business on the global stage and, according to the numbers, has an appetite for more.
Opportunities for growth
Greg McKenna, chief market strategist for Sydney stockbroker, Axitrader, insists that all the signs indicate that global trade is trending upwards.
“Australian manufacturing in a global sense hasn’t been this good for more than a decade,” he said. “Just last month, the International Monetary Fund (IMF) upgraded global growth for this year and next.”
The Organisation for Economic Co-operation and Development (OECD) has also predicted 2018 is going to be the first year in a decade when all of its member countries will experience growth.
“And that’s the big trend,” McKenna continued. “Global growth is back and it is synchronised.
“That means quality Australian manufactured goods – priced right and with the currency exposure managed appropriately – can deliver great opportunities for profitable growth.”
The next step is to ensure Australian companies get their hands on some of that pie.
Since 2013, the Turnbull government has concluded five Free Trade Agreements in addition to its existing links with China, Japan and South Korea.
That equates to 1.6 billion more people in the preferential market.
“Australia’s existing trade agreements are creating various opportunities in overseas markets for Australian manufacturers,” said Steven Ciobo, minister for Trade, Tourism and Investment
“Australia has an active forward trade agenda that will further reduce barriers holding back our exporters and create new trade opportunities.
“We will further cut trade red tape and support businesses wanting to capitalise on the massive opportunities in our region and further afield.”
The government’s trade agenda also includes the Indonesia-Australia Comprehensive Economic Partnership Agreement, and is negotiating trade agreements with Pacific Alliance countries (comprised of Mexico, Chile, Peru and Colombia) as well as Hong Kong.
Negotiations are also ongoing for the Regional Comprehensive Economic Partnership (RCEP) between the ten member states of the ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam).
There is no surprise that Asia makes up for most of Australia’s imported goods – from textiles, printing and minerals manufacturing in China, to metal and transport parts made in Japan and petroleum from Singapore.
However, in addition to trade routes between New Zealand, the US and Europe, China and Japan do represent a large chunk of Australian manufactured exports across sectors including textiles, food and beverage, as well as wood and chemical production.
This is of course fluid, meaning that political – and even cultural – changes can open the door for Australian manufacturers.
AstraZeneca Australia, the manufacturer of respiratory medicines, came close to shutting its Sydney-based factory in 2010, following a decline in its export to the US medical market.
Around the same time, China had invested US$125 billion ($A160 billion) into its own medical system to tackle problems with pollution levels, and presented an opportunity.
“There was an instant requirement in China for respiratory products for asthma,” said Paul Ives, head of formulation and services at AstraZeneca Australia, which now delivers more than $500 million worth of exports.
“The decision was to close the Australian facility at that point, even though we were performing better from a cost and productivity perspective.
“We have come from effectively being a factory that was closing down in 2010 to what is now the fastest growing site in the AstraZeneca network.”
The metals movement
Japan, Papa New Guinea and China are the three top suppliers of primary metals manufacturing to Australia, according to statistics.
The sector, however, has proven to be a strong area of export for Australia, with fabricated metals in high demand in Hong Kong, the UK and China.
In May, Adelaide surface engineering company, LaserBond, shipped its first customised laser cladding system to China, where the Chinese government is supporting the re-manufacture of metal components.
Laser cladding is the process of adding a pure metal or alloy in powdered form to a re-manufactured component – to protect it from corrosion and wear – and gave LaserBond a foot in the door.
“There’s no absolute on the future – you just position yourself as best you can until you get there,” said Wayne Hooper, LaserBond’s executive director.
“Our strategic international relationships are growing on the supplier side and customer side. We are delivering for companies who are seeking high performance wear resistance in particularly tough situations.
“LaserBond excels when working in strategic partnerships. As an example, we also designed a machine tailored for an international company that makes a 10-ton crusher roller, which allows them to refurbish it.”
Seeing the potential for growth is the first step to building the country’s small and medium sectors. The next stage is getting out there and giving Australia’s innovation room to breathe.
This was address by Michael Sharpe, director of the Advanced Manufacturing Growth Centre, who demanded a “massive workforce transformation” if Australia is to expand its manufacturing industry.
“Some of the manufacturers I am talking with are looking at the Free Trade Agreements but they also other partnerships through global linkages,” Sharpe said.
“There are world-class products flying off the shelves [in Australia] and, if we were able to get them into the US market or Europe, I would have no hesitation saying that they would sell like hot cakes there too.
“Australian manufacturing is much larger and stronger than people give it credit for and is also transforming rapidly, with exceptional opportunities ahead of it.”
Connecting locally first
According to a recent international study by the tracking and computer technologies manufacturer Zebra Technologies, Australian manufacturers must assume increased connectivity in their factories if they want to grow globally.
“Whether it is in retail, transport or any other sector, we see a very common scenario in the manufacturing industry, and that is companies do want to grow the geography of their business,” said Tom Christodoulou, Zebra’s regional director for Australia and New Zealand.
“However, if their setup is manual and there is no visibility across the organisation, it becomes very difficult to scale up and manage the business overseas.
“Having that visibility and full traceability, it gives your suppliers an up-to-date view of the company and that’s when the company comes into its own.
“Having a connected business is now considered a ‘must’ if your company wants to grow outside of Australia. If your data is out of date, you will become a difficult company to work with and that will really slow down growth.”