Manufacturing back on the agenda

Editor's comment piece from the February issue of Manufacturers' Monthly.After being ignored for the past decade or so, recent changes in ALP’s leadership have put the manufacturing industry back on the front page.

IT might not have been akin to winning Lotto, but to hear Kevin Rudd talking about the importance of the manufacturing sector to Australia’s economy on his first day as leader of the Federal Labor party was pretty close.

Strong government action to revive the manufacturing sector is now firmly on the ALP’s agenda. While scant on details at this stage, Rudd has made it clear he will not be turning the clock back to include heavy tariff barriers or protection. He has also sought to cool fears that his plans would not amount to corporate welfare by handing out subsidies to large companies as state governments did in the past to attract investment.

Leading the charge to re-build the manufacturing sector is Senator Kim Carr, who returns to the industry portfolio he held under former leader Mark Latham. A member of the Victorian Socialist Left with genuine passion for the manufacturing sector, Senator Carr has been charged with developing an industry policy to give Australia a sustainable future in manufacturing.

Talking to the Senator last month, it is clear he is delighted to be back in the portfolio. While Carr’s industry policy is still in its gestation period, it’s clear he sees innovation and R&D as key elements in lifting industry’s performance.

Carr says the Labor party will take a much more vigorous approach to the question of an innovation policy in all its aspects, from research through to the development side, including manufacturing services and improving the creative processes. Carr understands manufacturing is very much part of the creative industries, saying manufacturing is about human creativity, developing new products and meeting human needs.

He speaks about changing behaviours and attitudes, saying the whole purpose of government programs is to stimulate and increase activity levels. He made it clear he thinks the present R&D tax concession is not working, pointing to Australia’s extremely low OECD ranking. He hinted the tax concession could return to 150%, plus further initiatives to encourage collaboration with public research agencies.

His plan is to improve the level of co-operation between industry and our universities and our public research agencies. It is clear he has the CSIRO in his sights, and is planning to reverse the research organisation’s withdrawal from manufacturing, claiming the organisation is no longer fully fulfilling its charter.

While recognising the importance of emerging industries, he says it should not come at the expense of servicing the existing manufacturing sector.

“That is how you get emerging industries, the new grow from the old.”

But more than just innovation and R&D, he says it’s about a whole range of government programs, it’s also about the provision of infrastructure and the provision of workforce training capacity plus the health and the skilling of the workforce and their intellectual development. “It’s also about ensuring that we have adequate supplies of skilled personnel, and that’s why maths and science are so important in terms of an innovative culture.”

If Kevin Rudd and his team do get into power later this year, don’t be surprised to see the return of a manufacturing council/forum. Carr likes the idea of actually getting industry people together, however that will include members of the union movement as well. He also has plans for changes to public sector procurement and possible expansion of a Buy Australia campaign.

But Carr is also quick to point out the ALP has no money tree in its backyard and admits he will not be able to meet all conceivable demands. “There are obviously areas of the economy where winners pick themselves rather than us picking them.”

However, he did talk of improving the value chain in terms of the pharmaceutical, biomedical and bioagri businesses. “We have some of the best researchers in the world. We have an enormous network of small to medium size companies in the biomedical or bioagri businesses, and we have successful pharmaceutical manufacturers. What I’d like to do is to see how we can increase the level of co-operation between those different groups that often act disparately from one another.”

Carr is also looking into whether or not the ALP can bring the multi-national companies with Australian branch offices into the taxation system. “I’m interested in pursuing the recommendations of the productivity commission. I’m reviewing the appropriateness of the beneficial tests that currently prevents pharmaceutical companies from being part of the R&D tax concession.”

While the ALP’s industry policy is some months away, suddenly manufacturing is back on the front page following the changes to the party’s leadership. This can only be a positive move, and might, just might, put a little more pressure on John Howard and his team to put manufacturing back on its agenda.

Industry minister, Ian Macfarlane, is expected to release his new industry policy next month, but it appears not much will change with assistance programs for the automotive and TCF sectors to continue, but not extended or expanded. Macfarlane’s focus appears to be on exporting and linkages into global supply chains. However, unlike the ALP, Macfarlane says future industry funding will be strictly limited.