National Manufacturing Summit 2018: Same direction, renewed focus

The 2018 National Manufacturing Summit gathered industry stakeholders to discuss solutions to two of the most critical issues facing the manufacturing sector today: energy security and vocational education. Manufacturers’ Monthly reports.

The 2018 National Manufacturing Summit, hosted by Weld Australia in the Parliament House in Canberra on June 26, took up the discussions on the prospects of Australia’s manufacturing sector where they were left off at last year’s inaugural summit in June 2017.

The inaugural National Manufacturing Summit, hosted in June last year by the Australian Institute’s Centre for Future Work, highlighted that Australia’s manufacturing sector is poised for a turnaround – as documented in the Summit paper, “Manufacturing: A Moment of Opportunity.”

Following on those lines, this year’s Summit focused on the two crucial areas that the Australian manufacturing sector is facing in achieving that predicted turnaround: energy insecurity and the fragmented skills and training. Jim Stanford, director of the Centre for Future Work, in his review of the key lessons from the 2017 National Manufacturing Summit noted that developments over the past year have proven right the conclusions drawn at last year’s Summit.

“We put out the statement in the Summit paper last year that the worst was over for the manufacturing sector. I’m glad to say today that we were right,” he said.

Data from the Australian Bureau of Statistics shows that trend total employment in manufacturing increased by almost 50,000 positions in the year ending in May 2018, making manufacturing one of the largest sources of new jobs in the entire economy – along with construction (50,000) and health and social services (57,000).

“We are on the cusp of a very promising time for manufacturing in Australia,” Stanford told Manufacturers’ Monthly.

“The underlying economics are really coming together. The business case for making manufactured goods in Australia is night-and-day better than it was five years ago,” he said.

Professor Ross Garnaut, president of SIMEC Zen Energy discussed ways to make manufacturing competitive again.
Professor Ross Garnaut, president of SIMEC Zen Energy discussed ways to make manufacturing competitive again.

But, he also noted that to take full benefit of that opportunity, the stakeholders must collaborate to resolve issues around energy policy and vocational education and training.

“We have to be very careful to make the most of that opportunity. We could lose it if we don’t fix some of the crucial problems and challenges in the sector. Energy policy and vocational education are two crucial areas that could go a long way in benefiting from this expansion in the years to come,” he said.

Bringing back competitiveness
Professor Ross Garnaut, president of SIMEC Zen Energy, in his keynote speech talked about the reasons for the decline of competitiveness for Australian exports over the past years, while agreeing that the “stars are realigning” for the sector.

“The manufacturing sector broadly has two parts: the domestic market and a trade-exposed part. To have sustained growth in domestic demand, we need a strong performance from the trade-exposed part of the economy and manufacturing is a very important part of that.

“The trade-exposed part of manufacturing did extremely well for 20 years, from the beginning of the reform era in 1983 until the beginning of the resources boom in 2003. But, that all went into reverse with the resources boom and a big increase in the real exchange rate. That was reflected in negative exports for manufacturing from 2003 until a few years ago,” Garnaut said.

According to Garnaut, this decline in exports was further compounded by the huge increase in energy costs.

“In the 80s and 90s until the first dozen years of this century, our domestic gas prices were the lowest in the developed world – about a third of the gas prices in the US. All of that changed with the development of the export capacity. Due to the overinvestment in exports, the gas prices increased four to five-fold,” he said.

While the increase in gas prices directly affects the gas-dependant manufacturing businesses, professor Garnaut explained why gas is also important in setting prices in the electricity market.

“Gas makes up the balance between the base load production and the intermittent renewables production and demand from time to time. When demand is strong, we need extra electricity to be supplied by gas. Today, in eastern and southern Australia, gas is setting the price of electricity for about 30 per cent of the time,” he said.

But, he noted that Australia can regain competitiveness in the export market by resorting to more renewable energy, using batteries and gas to balance the intermittencies
in renewable energy, and rebuilding the skills base for manufacturing – a model that he said was being demonstrated by SIMEC Zen’s shareholder and GFG Alliance chairman, Sanjeev Gupta.

“We have the world’s richest renewable energy resources – which is the lowest-cost new-build electricity available now. As the whole world moves towards higher proportions
of low-emission energy, renewable energies could become a source of competitive strength for Australia,” Garnaut said.

Opportunities in renewables

Paul Hodgson, general manager – innovation and stakeholder engagement at the National Energy Resources Australia (NERA), further  highlighted Australia’s opportunity in the renewable energy sector.

“In Australia, we have a lot of the ingredients for energy success – from the battery minerals, to renewables sources such as wind and solar, bio-fuels and waste-to-energy. If we can take a step back and look at how we can make all the components of the energy system to work well, we can be known globally as a leading source of renewable energy solutions for the world,” he said.

Shadow Minister for Climate Change and Energy, Mark Butler, touched upon the debate around the National Energy Guarantee, commenting that the Energy Security Board was moving in the right direction.

“We are moving towards a model that I think really can be made to work,” Butler said. “The fundamental debate, however, is about the ambitions set out in NEG.”

While NEG sets a target of achieving 26 per cent reduction in the emission below 2005 levels by 2030, Butler said with the substantial reductions in the carbon pollution footprint of the National Electricity Market (NEM) over the past years, that target could be all but achieved by 2020.

“This meant that while sectors such as manufacturing, agriculture and transport would be required to reduce their emissions by more than 40 per cent from 2020 to 2030, the electricity generation sector would have almost zero emissions reduction responsibilities during the period.

“But we are trying to arrive at a bipartisan agreement, at least on the architecture of NEG,” he said.

The skills shortage in manufacturing
Similar to last year’s Summit, the Australian Institute’s Centre for Future Work issued an overview research paper parallel to the 2018 Summit, identifying key factors behind the rapid emergence of skills shortages in manufacturing.

The paper, titled “Advanced Skills for Advanced Manufacturing,” highlights that to sustain the emerging turnaround in manufacturing, as well as the transformation toward more specialised and disaggregated advanced manufacturing processes, the sector has an urgent need to strengthen vocational education and training.

The “why” and “how” of investing in manufacturing skills training was discussed by the Victoria Skills Commissioner, Neil Coulson.

He argued that despite the negative perception that the manufacturing jobs are diminishing as a result of automation, the contrary is true.

“There is a popular understanding about the future of manufacturing and manufacturing jobs that the era for manufacturing in Australia is over and that most – if not all
– manufacturing jobs are about to be wiped out by the fourth industrial revolution.”

“It is, thankfully, wrong,” he said. “As most manufacturers would tell you, humans will certainly work alongside robots for a long time yet. Goods manufactured using robots need to be programmed, finished and refined by humans.”

He cited evidence from a 2016 paper by OECD publishing, titled “The Risk of Automation for Jobs in OECD Countries,” showing that only about nine per cent of the jobs are automatable. “And these jobs were mostly at the lower skill end,” he said.

He also offered evidence from Victoria showing that despite the closure of the automotive manufacturing companies, the manufacturing sector was still a big employer in the state.

“Research by Deloitte shows the automotive sector has had neither a positive nor a negative impact on the number of manufacturing jobs in Victoria. Total manufacturing employment in Victoria was 278,000 people in 2015-16 financial year and 288,000 people in 2016-17.”

Director of the Centre for Future Work, Jim Stanford, explained why the skills shortage could become a pressing issue, relatively early in the industry’s recovery.
Director of the Centre for Future Work, Jim Stanford, explained why the skills shortage could become a pressing issue, relatively early in the industry’s recovery.

“In Victoria, manufacturing contributes $27.7 billion to the state’s economy and employs around 286,000 people in more than 13,000 businesses,” Coulson said.

Concluding that the employment “apocalypse” was unfounded, he said the big task ahead of manufacturers now is to move on to the “how” of skilling the manufacturing workforce for the future high-level manufacturing jobs – an approach that he said required a major cultural change in the view towards vocational training.

“As the US Centre on Education and Economy has argued, it’s time governments and employers recognise the obligation they have to help prepare young people for productive and many-fold employment.

He cited examples from the Victorian government’s efforts in making cultural changes from the school-level to encourage more students to choose careers in the manufacturing domain. This includes investments in new approaches to apprenticeship to make them more appealing for the new generation.

A recurring message throughout the Summit was the role to be played by manufacturers to actively engage in imparting the technical know-how required in their sector and in preparing the workforce for future jobs.

Innovation in apprentice training
An example of innovative apprenticeship approaches was demonstrated by Geoff Crittenden, Weld Australia’s CEO, who explained how Weld Australia has implemented Augmented Reality tools to transform the age-old processes of welding training.

“The basic principles and the procedures of welding training hadn’t changed in the past 150 years.” Crittenden said. “That was until we came along.”

Weld Australia’s Soldamatic Augmented (AR) Training is the first AR welding simulator worldwide. By allowing the welding trainees to interact simultaneously with the real world and virtual imagery, the technology helps to make welding training more attractive for the younger generation of welders.

Weld Australia delivers a comprehensive range of training, qualification and certification services to help Australian welders. “Weld Australia introduced the Soldamatic Augmented (AR) Training after realising that there was as much as 80 per cent failure rate in the welders doing their basic competency test,” Crittenden told Manufacturers’ Monthly.

“That’s why we introduced this program – which we call the ‘advanced world of certification’,” he said.

Another example of companies engaging directly with education in their streams was demonstrated by JAR Aerospace, a fast growing startup company engaged with development of customisable Unmanned Aerial Systems (UAS).

Jens Goennemann, managing director of Advanced Manufacturing Growth Centre, moderated a panel session on skills training.
Jens Goennemann, managing director of Advanced Manufacturing Growth Centre, moderated a panel session on skills training.

JAR Aerospace CEO and founder Jack Cullen explained how his company recently launched an educational branch aimed at engaging the youth and making STEM (Science, Technology, Engineering and Mathematics) education more accessible to young minds.

“When we founded the company, we realised that a lot of the kids coming out of the universities, TAFE and the school system aren’t up to speed with the state of the industry. We wanted our education system to help build that skill set from an early stage,” Cullen said.

JAR Aerospace’s education branch is focusing on creating interest in students and connecting them to the aerospace industry by involving students in drone design program, ship-building-kits, building their own 3D printers and going through space programs.

Building confidence in manufacturing
Shadow Minister for Skills, TAFE and Apprenticeship, Senator Doug Cameron also called for employers to take a more proactive role in the skills development for the manufacturing sector, noting that the demand for skilled workforce in the manufacturing sector was accelerating through technological changes.

“If Australia is to take advantage of opportunities in the global economy and to build productive capacity domestically, employers need to be investing in the regeneration of strong foundational qualifications in the workforce,” Cameron said.

Assistant Minister for Vocational Education and Skills, Karen Andrews, highlighted the role of the Australian Industry and Skills Committee (AISC) in responding to industry needs with regards to the skills shortages.

“The AISC already has a proven track record of responding to industry change as it occurs. It is driving a range of forward looking cross- industry skills projects, in areas such as big data, supply chain management, automation, digital skills and cyber security,” Andrews said.

She also spoke about the government’s programs focused on building the naval shipbuilding skills.

“The Naval Shipbuilding program puts in place a long-term pipeline of projects, which will be underpinned by a highly skilled workforce.

“The newly established Naval Shipbuilding College, and a new Naval Shipbuilding Industry Reference Committee, will ensure qualifications capture the right skills and standard for this industry,” she noted.

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