Skills are key to securing local content

local content

Manufacturers’ Monthly speaks with South East Melbourne Manufacturers Alliance CEO Vonda Fenwick about the government’s approach to local content and the skills challenge facing Australian manufacturing.

With a new government in charge, eyes are peeled on Anthony Albanese to see what proactive strategies Labor will implement to help Australian manufacturing. In June, the Prime Minister announced a billion-dollar investment as part of the country’s new advanced manufacturing strategy. Albanese said, “I want to use the power of government to bring back Aussie manufacturing. Because Australia should always be a country that makes things.” Targeted government support for local manufacturers may be key to helping Australia catch up to the pace of the global economy – Manufacturers’ Monthly posed the question to SEMMA CEO Vonda Fenwick.

Question: What does the new government need to do to improve local content in Australian manufacturing?

Fenwick:

First of all, we were heartened by Anthony Albanese’s budget reply and his campaign announcements because they talked about their ‘Buy Australian Plan’. We have advocated strongly for quite some time – particularly in the last 12 months when we had the ear of both government and opposition MPs – on the importance of local content in government procurement.

Mr. Albanese referred to the Australian government spending around 190 billion on government contracts at the federal level over the last three financial years, showing that procurement policy is a major economic lever available to drive the economic recovery. And when you are looking at those kinds of numbers, it is quite clear that if we can get a significant proportion  of those contracts, it is going to benefit our manufacturers. They talked about actually locking in laws that would establish key elements of the Commonwealth procurement rules to fully support local industry accessing government purchasing opportunities.

local content
SEMMA CEO Vonda Fenwick.

This is done at the Victorian level and the Local Jobs Commission has been quite active with improving the percentage of local content in our major infrastructure and rail projects – to see that happen at a federal level would be great.

One of the promising announcements from the new Federal Government involved opening the door for more government work for small and medium businesses by decoding and simplifying procurement processes. One of the challenges we have found when talking to government about large contracts is that they are not often geared to deal with SMEs.

We have always said that there needs to be recognition at government level that 95 per cent of employment in manufacturing in Australia is within SMEs.

We understand the government cannot be all things to all people, but a little concern at the moment is they seem to be picking up on the same six categories which the previous government were focused on. You obviously have to have defence and medical equipment capabilities, and if the pandemic taught us anything, it’s that we need to be much more self-sufficient. Government is starting to look at the semiconductor space, because you cannot have smart defence equipment and you cannot have smart medical equipment or other smart high value products unless you have got semiconductors. It is a huge investment, but if we do not have at least some access to semiconductors, we have got a significant problem. We think the Southeast would be ideal for setting up that kind of process because  the region is geologically stable with access to water as well as transport options and easy access to CSIRO facilities, the synchrotron and university precincts.

When we had a look at the six preferred categories, it leaves out something like 70 different sectors within manufacturing, so I think the approach needs to be a little more flexible in terms of spending and investment. The problem with the distinct categories is if there is a  limited amount to spend, we may  end up filling a quota in a chosen category where it could be more cost effectively invested elsewhere.

It seems to me that with policy at times, and certainly we have seen that with the modern manufacturing strategy, there has been a focus on gearing it towards large companies. There needs to be recognition that the manufacturing landscape and the supply chains are made up of small to medium enterprises and the legislation needs to reflect and support that. For example, we have seen contracts where  onerous risk clauses had been cascaded so far down the supply chain that it was impossible for our local manufacturers to participate.

We need to have both policy settings and the percentages in place to guarantee local content, and it appears that the current government is putting these forward which aligns with the advocacy we have been doing over recent years and have put to government members repeatedly in the last 12 to 18 months.

Question: In order to help grow SMEs, they will have to grow in size themselves. How can we help train and upskill more workers into different manufacturing roles?

Fenwick: There are several fronts on which we can tackle that. There is a big focus on creating jobs, but jobs are not the problem which needs fixing – we need to find the skilled workers to fill the jobs. Some of our members cannot afford to limp along for another few years or knock orders back due to a shortage of skilled labour , so they are investing in automation, including robots to perform essential tasks.

Once again, the government has talked about 465,000 fee-free TAFE places, but one of the challenges we find is that the need is there right now. Not just in our industry but across the board, but especially in manufacturing, the need for skilled workers happened yesterday rather than in three years when people exit with their trade and university qualifications.

So, I think we have to be a lot more creative about what we do to start to get those skills. You would be aware of the welding programme that we have developed. We are about to do our fifth pilot course in our SEMMA Welding program next week, and I can tell you from our first few courses the model works a treat. We have been able to take unskilled people who never held a welding gun and in four weeks, they are heading out to a job with one of our SEMMA manufacturing members because they have developed that basic skill set. Critics will say it won’t replace a trade qualification: we agree and do not want it to replace a qualification – it creates a basic skillset. A number of people from the course have been offered apprenticeships with companies. You can provide someone who has done nothing more than low skill, insecure casual work for years, with a real career path in manufacturing.

We also have a perception problem at the front end. One of the programs that I was involved with in the employment space through the Southern Metro Partnership, which is a Victorian government initiative, was looking at trying to attract people not just to manufacturing, but also to aged care and hospitality. They ran three information sessions, one for aged care, one for hospitality, and one for manufacturing. And they measured the level of interest of various age groups. In hospitality, 58 per cent of the 15 to 24 age group were interested in work in the hospitality sector . For aged care, the figure was around 30 per cent in the age group. In manufacturing, there was no one from the 15 to 24 group who said I’m interested in manufacturing, not one.

Some schools have some great initiatives in place to encourage students to consider careers in manufacturing. However, we have talked for years about needing a national initiative similar to the tourism advertising drives – something really visible in prime time television or on social media which is going to highlight how essential and wonderful manufacturing is. We are seeing more emphasis on STEM subjects, but we need something national which gets young people and their parents excited about manufacturing as a career.

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