Recently, I penned a short article on Australian manufacturing and its latent potential. It correlated with the 10th anniversary of a foundational piece of research delivered by McKinsey & Company titled “Compete to Prosper”.
Association Comment Jens Goennemann, Managing Director, AMGC
This 2014 report, which is still available to download, identified where Australia’s hidden potential should be developed to better equip manufacturers for global competition.
Its message was ambitious yet reasonable. Australia, including its advanced manufacturing community, should double down on areas of strength, acknowledging the “remarkable opportunities” in being good enough to be in demand internationally, and embracing the benefits of emerging technologies: “These forces can either be harnessed as opportunities or endured as threats… they create the opportunity for another period of sustained growth.”
Interestingly, there is another 10th anniversary worth exploring. In 2014, IBISWorld published its Top 100 Manufacturers in Australia. It included ownership data – foreign or local. This list contained an impressive line-up of manufacturers, ranked by revenue – resembling the who’s who of the ASX.
However, its message in this year’s release is mixed. No longer is ownership data shared, which may be a simple omission, but it is easy to spot the international ownership in Australian manufacturing. The current IBIS list, which can also be downloaded as part of October’s Manufacturers’ Monthly, shows a considerable proportion of Australia’s large sized manufacturers being under foreign control.
This draws us to a Future Made in Australia. A timely promise from the Australian Government to “maximise the economic and industrial benefits of the move to net zero and securing Australia’s place in a changing global economic and strategic landscape.” An auspicious and audacious move alike, given our latent potential and foreign investment.
Currently, Australia supports global markets in many ways. According to the Reserve Bank of Australia in its 2024 Composition of the Australian Economy, the Resource Sector accounts for over 60 per cent of exports – manufacturing represents just eight per cent.
The large slice of our economic pie comes from raw commodities, minerals extraction, and food production leaving value-adding activities of manufacturing behind. That value-add piece is Australia’s latent potential – and why we do not see more, medium- to large-size manufacturers in the higher ranks of IBISWorld Top 100. We simply do not invest enough in growing Australia’s manufacturing capability.
It is unnecessary in economic terms for our nation which grows enough produce to feed 75 million people, to import more food by value than we export. Yet, the Australian Food and Grocery Council finds that Australia exports $39.4 billion worth of food and imports $46.4 billion worth of food products – value-added products for which Australians pay a premium, because who wants raw vegetables, grains, or meat.
For almost a decade, the Advanced Manufacturing Growth Centre’s (AMGC) mission has been to unlock manufacturing’s latent potential and to help these businesses scale. It was established the year after Compete to Prosper was published as a result of its influential clarion call.
The response from the then-government was to establish five Industry Growth Centres, including AMGC, to tap into, with a modest budget, the actual or latent economic opportunities. Then, as now, murmurs of “picking winners” could be heard. A bipartisan and enduring position is that all resources are finite and are best deployed where they are likely to yield results.
Since its earliest days, the AMGC team sees its most impactful contribution, in addition to putting manufacturing back on the map, to be its industry-led co-investment strategy. The results are remarkable: 4,000 new jobs and $1.62 billion in additional revenues from just $50 million in taxpayers funds spread across 150 promising manufacturers – an ROI of 25:1. Such measurable outcomes have kept manufacturing – and AMGC – relevant across changes of government at the federal, state, and territory levels because you can’t ignore the numbers.
As the nation seeks to find its place in a world transitioning away from fossil fuels and determined to address other weighty issues, the ability to make things, add value to what can be found on the ground, under the ground or otherwise, will be the critical capability that defines the opportunities afforded to generations of Australians.
The roadmap must include a concerted effort by the four principal stakeholders of any national success: industry, government, research, and the public service. Interconnectedly, these roles ensure stability and prosperity of Australia with manufacturing as a driver of good, high-value jobs and income generation – only achievable through making complex things the rest of the world wants to buy and not only us just because it’s “proudly made in Australia”.
The opportunity is best exemplified by AMGC alumni and ASX unicorn Alpha HPA. This Queensland-based manufacturer is on track to become a key supplier of high purity alumina, an essential ingredient in lithium-ion batteries, LED lighting, ceramics, and medical devices for global clients. By enhancing aluminium oxide through a proprietary process that is 70 per cent more energy efficient, Alpha HPA can sell its products for $35 per kilo, compared to just 35 cents for standard aluminium oxide. This innovative approach boosts profitability and is set to create 300 new jobs onshore. Remarkably, just five years ago, when Alpha HPA first partnered with AMGC, the company had fewer than 10 employees.
As the Prime Minister, Anthony Albanese has said “If we hang back, the chance for a new generation of jobs and prosperity will pass us by – and we’ll be poorer and more vulnerable as a consequence”.
Alpha HPA’s journey is proof it can be done with the right mechanisms in place. For Australia to miss out on its competitive advantage from adding value to our abundant resources or making other smart things would mean seeing our brightest industries move offshore – well before they have an opportunity to enter any future IBISWorld list.
It would be foolhardy to lose another decade when we know manufacturing is the answer to a Future Made in Australia.