According to this interview with Innes Willox, The Ai Group CEO, "Germany is in some ways a model for Australia when it comes to economic development, particularly around manufacturing."
Intro: I’m Innes Willox, I’m the Chief Executive of the Australian Industry Group which is a very broad based business organisation – representing the interests of industry across the economy – so across mining services, manufacturing, construction, defense and the services sector.
I started in this job as CEO of the Australian Industry Group in May last year, prior to that, I was the Head of International Government relations for the Australian Industry Group and before that I was a journalist in Melbourne and Canberra and I was the Head of Corporate Affairs for Singapore Airlines in Singapore for 4 years, and then I was also a Diplomat, I was the Chief of Staff to the former Foreign Minister Alexander Downer, so I came to this position with a rich and varied background but very much with the interests of Australian business and Australian economic growth at heart.
Q: You are a speaker at the forthcoming Productivity, Process & Innovation Conference that brings together Australia and Germany. What do these two far-away countries have in common?
Willox: Germany is in some ways a model for Australia when it comes to economic development, particularly around manufacturing and when you look at the relationship between German business and German research institutions and just the way that the German ’Mittelstand’ go about the way of doing business is very impressive for Australian business. Australian industry has a very different make-up to its German counterparts – we have many more smaller businesses but there are lots of lessons we can learn.
One of the other jobs that I have, I’m on the board of Innovation Australia which is a government agency looking at developing Australian innovative capabilities – so we look at what happens in Germany around the ’Mittelstand’ and around institutions like the Frauenhofer Institut as examples of how we could potentially go an develop our own industrial capabilities. So there are a lot of links there – obviously there is enormous German investment in Australia and growing Australian investment in Germany, so if we can build the linkages between the two countries and learn lessons from each other, both economies will advance.
Q: In the media there is a fair bit of negativity around industry and in particular manufacturing. Is this sentiment justified?
Willox: No, not at all. Australia is a nation that has very strong both traditional and developing manufacturing capabilities. I think there’s been a sense in the past within Australia that we are moving to a services based economy wholly but that as well as a resources based economy – so those two would be the main struts of our economy but what that neglects is the fact that capabilities like manufacturing, agriculture and agri-business have long been the mainstays of our economy and they provide balance to our economy.
A lot of the debate around manufacturing and industry in Australia is really the result of how this sector is changing. We’re a high cost economy – so we cannot compete on cost we have to compete on skills – we have to compete on our research and development capabilities, we have to be able to compete on our ability to reach out into the region but this is a sector of the economy that’s undergoing quite a significant change and as there are pressures there will be a lot of debate and discussion about its future
Q: The answer to high labour costs is usually the introduction of new technology in manufacturing. Is that happening fast enough in Australia?
Willox: We’re seeing the rise of automation, we’re seeing the rise of new processes, we’re seeing the rise of technology so the image of manufacturing in Australia as old and almost Dickensian – that’s an image that really doesn’t stand the test of time.
Q: There is a cloud over the future of the car manufacturing industry and that must concern you particularly all the companies in Victoria and South Australia.
Willox: It does concern us because the automotive sector is very much a key to our industrial base.
The automotive industry either directly or indirectly employs almost 30% of the manufacturing work force in Australia. You look at the major car manufacturers and then you look at all the component parts suppliers – it’s a significant part of our industrial base. There aren’t a lot of companies now that are wholly reliant on the automotive sector – some are – but a lot of companies use it as a base for their diversification, so they move into food or defense and energy, or environment, or rail – all those other sectors but the automotive sector provides the underpinnings.
So, we’re one of the few countries in the world that still manufactures or assembles cars and it is not a decision we should take lightly to let that go.
Q: The new Prime Minister Tony Abbott has foreshadowed during the election campaign that he wants to reduce the subsidies for the car industry. Is that the answer?
Willox: Well, the sector has to be able to compete but it also has to be provided with the conditions to compete and the new government has said that it will continue automotive industry support into the future but at a potentially different or more reduced level over time and that’s obviously going to impact on the investment decisions of particularly Holden and Toyota here. As long as there is plenty of time for the industry to adjust – and one would hope that it is able to adjust – but quick and sudden decisions could very much provide the death knell for the sector so we have to treat it with some caution and make very long term decisions about its viability and also its value to the Australian industrial base. Our strength into the future is going to be – in part – around our research and development capabilities and how we utilise those because of our high cost base. So we need to be open to migration – highly skilled migrants – and we need to do much more to train up our workforce for the future.
Q: Germany has a good track record when it comes to vocational training and up-skilling its workforce. Do you think Australia can learn something from Germany in that way?
Willox: Absolutely. In many ways Germany is the model and if you look at companies in Australia like say Hofmann Engineering (http://www.hofmannengineering.com/) which is a German family company they do a tremendous job around up-skilling their workforce and bringing the skills that are necessary to work sites and Germany is an example of a nation that does it right.
Q: And finally Innes, what is your outlook for the Australian economy?
Willox: Look, we’re going through a period of slowing growth as the resources boom tapers off – now we have to find alternative means of growth. I’m relentlessly optimistic about Australia. We’re very well placed geographically, we have enormous natural resources, we have a highly skilled population, we’re open to immigration, we’re willing to learn, we have a lot of benefits in Australia, so, we’re going through a period of quite significant structural adjustment of our economy at the moment and that will be unnecessarily painful for many but our hope and expectations is that we will emerge from this with advanced skills and advanced capabilities and greater access to markets and a highly skilled workforce and if we can achieve this than we should be nothing but optimistic about the future.
Q: And Germany can play a role in getting Australia up and running again?
Willox: Absolutely! Germany is a very significant trading partner for Australia. It’s a gateway into Europe. We got to look at Europe over the longer term and believe that it will recover – it’s going through a very difficult patch at the moment – but is still a significant export market for Australia – so, there’s a lot we can learn from each other and a lot we can benefit from.
This interview is courtesy of the German-Australian Chamber of Industry and Commerce.
Innes Willox will be a speaker at the Australia-Germany Business Conference 2013. For more information on the event or to register a spot, click here.