A gas-led recovery will not work

“We need to get the gas from under our feet.”

So said Prime Minister Scott Morrison during a speech in late January, emphasising his plans for a “gas-led recovery” following the COVID-19 pandemic. Morrison has committed a whopping $6 billion to the development of gas in Australia, in an economic strategy that is entirely contrary to the interests of the country.

Meanwhile, Australian manufacturing is in decline, despite the significant contribution that the industry can – and already does – make towards the economy and the national interest. Our economic recovery should be led by manufacturing. It should take advantage of, and building on, the substantial innovation, skills and technology that are readily available.

Government, at all levels, must invest in the manufacturing sector to support its growth. Australia’s COVID-19 recovery cannot be resource led. It must be manufacturing led.

Now is the time to rejuvenate our manufacturing industry – to make manufacturing a national priority.

A resources-led recovery just won’t work

The Federal Government’s plan to invest in gas would significantly expand the industry and tie our economic fortunes to the resource for decades to come. The strategy is based on the idea that manufacturing relies on gas in a way that cannot be replaced by alternative energy solutions. But as we know – and as Ai Group pointed out to the government – manufacturing’s reliance on gas has been completely overstated. We do not need investment in gas to become a more successful industry. We need investment in manufacturing itself, including technology, equipment and education.

Further, Australia’s major export markets for LNG, such as Japan, South Korea, and China have committed to reaching net zero emissions in the next 30 years. Globally, countries are turning away from gas and coal and investing in renewables. It simply doesn’t make sense to base our economic recovery on a resource that has a clear expiry date.

In fact, the gas industry has been preparing for this transition for years, cancelling major projects and laying off workers. Since 2011, Australian gas companies have lost between 50 and 70 per cent of their value. To think that this loss-making industry is going to lead Australia out of economic trouble is absurd. Our government needs to stop pursuing industries that will be almost redundant in 30 years’ time and begin to invest in future-proofing our local manufacturing sector.

The future lies in advanced manufacturing

Advanced manufacturing is the way forward. Overseas investment in advanced manufacturing is prioritised by governments, and local populations support the industry by buying locally-made goods. Advanced manufacturing employs millions of people in overseas markets, contributing billions of dollars to their economies.

In Germany, advanced manufacturing has been identified as one of the highest-priority manufacturing technology areas in need of government investment. Over 15 million people are directly and indirectly employed in the advanced manufacturing industries in Germany. By 2025, 84 per cent of German manufacturers plan to invest €10bn per year into smart manufacturing technologies, including in engineering and construction, electronics, metal working, and the automotive industry. 20,000 industrial robots are utilised in Germany each year, making it one of the largest markets for robots in the world.

Similarly, Sweden has invested heavily in R&D and innovation to continually grow and improve their manufacturing sector. Today, the manufacturing and industrial engineering sector accounts for 20 per cent of Sweden’s GDP, or US$110bn. The Swedish Government has long supported their local manufacturing industry, focusing on digitalisation, innovation, and promoting talent. It is no surprise that the industry attracts significant investment, with current annual R&D investment of around US$11bn.

Advanced manufacturing has been shown to boost profitability in countries around the world. Labour cost savings through automation and robotics have resulted in a 33 per cent cost savings for manufacturing industries in South Korea, and a 25 per cent saving in Japan. Money invested in upgrades and new technology has been shown to be quickly recouped: in the US, a Toyota plant spent $1.2 million on a smart factory modernisation and saved $1m in the first nine months through maintenance savings alone.

And while there has been some scare-mongering around robots replacing humans in manufacturing industries, in reality the opposite is true. Higher profits that result from smart manufacturing technologies give companies more capital to finance improvements and expansions, which require hiring more workers. Dangerous and mundane jobs are completed by robots, while humans are retrained to take on more challenging tasks. According to one research company estimate, 15 million new jobs will be created in the US over the next decade as a direct result of automation and artificial intelligence.

The possibilities of local innovation

Despite having a fraction of the support and investment that has contributed to other countries’ success in advanced manufacturing and technology, Australia has made astounding advancements.

The QUT Centre for Robotics is at the forefront of innovation in intelligent robotics. Some of their amazing projects include the development of the: RangerBot AUV, an underwater robotic vehicle with advanced real-time image processing; the “Kelpie”, an autonomous robot for use in large scale agriculture and weed management; and a robot manipulator designed to perform maintenance on mining machines to avoid the risk of human intervention.

Innovation in advanced manufacturing is – in no way – limited to Australian universities. Many of our local SMEs are at the cutting edge of research and development. For instance, the Artificial Intelligence (AI) and Industry 4.0 methodologies and technologies developed by Queensland-based IR4 are setting global benchmarks in efficiency. It is for this reason that IR4 (in partnership with Weld Australia and QUT) is in a position to engage with global prime contractor, BAE Systems, on using their technology to improve welding cobot capabilities for the Hunter Class Frigate Program.

Strength through technology transfer

A key ingredient in an advanced manufacturing post-COVID recovery is technology transfer. By sharing skills, knowledge, insights and technology, the Australian manufacturing industry can speed up commercialisation, reduce overheads, streamline internal processes and enter export markets more quickly.

Weld Australia recognises the importance of technology transfer, which is why we host and administer Technology Networks. Comprised of industry-leading companies, state road authorities, major power stations and a range of prime contractors, our Technology Networks provide a forum for sharing insights and R&D, and link members with industry and research organisations.

We are not the body helping to support technology transfer in the manufacturing industry; some state governments have also stepped up. For instance, the Queensland state government recently allocating $30m to fund a series of Regional Manufacturing Hubs. These Hubs are assisting local manufacturing businesses to take advantage of new technologies and build strong links with universities, TAFEs and schools, developing a future workforce ready to take on the challenges of becoming a world leader in advanced manufacturing.

Manufacturing contributes around $20bn to the Queensland economy each year and creates a significant amount of direct and indirect employment. Clearly, the Queensland state government has made a smart investment in the Hubs, demonstrating a growth mindset that is sadly lacking in other parts of the country.

A manufacturing-led recovery

Economic recovery in a post-COVID world must be based on investment in the Australian manufacturing industry. The boost to the national economy provided by a globally-competitive manufacturing sector would put us in a strong position to repay the $230bn pandemic stimulus package debt – something that simply won’t be achieved through federal investment in gas.

It will take strong leadership, investment in technology and education, and the support of government at all levels. Only then can Australian manufacturing return to its former prosperity and make a vital contribution to Australia’s economy, workforce, and future.

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