Industry minister talks to Manufacturers’ Monthly

Manufacturers’ Monthly’s Editor-at-Large, Alan Johnson, questioned manufacturing’s new industry minister, Ian MacFarlane, on the major issues facing industry going into 2014.

Johnson: Australia’s manufacturing industry has been in decline for many years. What are your plans to slow or reverse that decline?

MacFarlane:  In 2012-13, the Australian manufacturing industry contributed $105.5bn to the Australian economy and employed around 950,000 people.  

Our Government is committed to working with Australian manufacturers to make our manufacturing industry globally competitive and a source of jobs growth and investment. 

We have appointed a Minister for Trade and Investment, Andrew Robb, to encourage direct investment in Australia and our industries. 

We will also:  

  • Remove cost barriers for manufacturers by cutting red tape for businesses by $1bn per year.
  • Develop and implement Action Agendas to encourage investment in high growth manufacturing industries.
  • Introduce a $50m manufacturing transition grants programme.
  • Improve incentives for businesses to invest in technology, and research and development.
  • Build Australia’s manufacturing export base, by restoring funding to the Export Market Development Grants initiative with an initial $50m.
  • Create a level-playing field for Australian manufacturers by strengthening the anti-dumping regime and reviewing competition laws and frameworks.

Johnson: The US has a number of strategies to reverse the decline of its manufacturing industry, one being its very successful ‘Buy America’ campaign. What are your thoughts on replicating that with a boosted ‘Australian Made’?

MacFarlane: The Government is committed to building a stronger more productive and diverse economy.  

We will reduce red tape, cost and the regulatory burden imposed on industry. 

Although we encourage Australians to ‘buy Australian’, forcing companies to buy Australian would increase costs with associated risks of reducing competition and moving projects offshore. 

Johnson: Low-cost energy has been one of our industry’s strategic advantages, but that is changing. Many are calling for Australia to follow the US and Canada’s example and quarantine a percentage of our gas for domestic consumption. Your response? 

MacFarlane: The US and Canada do not actually reserve a percentage of domestically produced gas for local consumption, instead both countries apply an assessment of gas exports to ascertain if there is sufficient gas for the domestic markets, although, in the US, if a country has a free trade agreement, approval to export is granted. However, neither country has declined an LNG export licence application or determined that LNG exports are not in their national interest. 

The Australian Government supports market based outcomes as the most effective way of stimulating investment to develop Australia’s gas reserves. Interventions such as reservation policies to force price or supply outcomes are more likely to impede than promote supply.

The Government does not support a retrospective or blanket gas reservation policy, but one possible alternative would be an acreage system, where some of the gas from future investments and future projects could be set aside for domestic use.

I’ll continue to consult with gas producers and consumers as the Government prepares a new Energy White Paper and work on a gas supply strategy for the East Coast gas market to the year 2020.

Johnson: When it comes to our car industry, we have a very open market, but that’s not the same with our competitors.  While they may have low import duties, our competitors have numerous ‘strategies’ to limit imported cars. How can we ensure we have a vibrant car industry – long term?

MacFarlane: Australian consumers benefit from one of the most open and competitive automotive markets in the world, with more models available to local buyers than in the US and the UK. 

This open market, the high Australian dollar and relatively high manufacturing costs have created a challenging business environment for our automotive manufacturers. 

Yet, last financial year (2012-13) they exported $3.7bn of cars and components, a 6% increase on the previous year.

As some economies apply ‘non-tariff measures’ to restrict the import of vehicles into their markets, the Australian Government is committed to pursuing an ambitious trade policy, particularly in the Asian region, which recognises the importance of dismantling barriers that restrict trade and investment.

The Government has initiated a Productivity Commission inquiry into the Australian automotive manufacturing industry. 

The inquiry will ensure that any support for the local automotive manufacturing industry is accountable, transparent and targeted at the long-term sustainability of the industry.  

It will also provide the Government with the information necessary to provide policy certainty to the industry.

Only when the Government has all the information, can any decisions or plans be made about the future of the automotive industry. I strongly encourage all stakeholders to provide a submission to the inquiry.

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