A bold manufacturing plan has been laid out by the federal Nationals that shakes up the complacency of the “market knows best” bureaucrats that have held sway over industry policy for the past several decades.
But the policy plan’s insistence on linking manufacturing support to modern coal-fired power stations has already raised the ire both of the left, who cannot abide any policy that has anything to do with fossil fuels, and of the Morrison Government, which is tiptoeing toward a net-zero emissions policy by 2050.
The policy paper, developed by Queensland Senators Matt Canavan and Victoria’s Bridget McKenzie, is aimed in particular at boosting the manufacturing capacity of the regions, which account for more than 60 per cent of Australia’s exports.
Regional growth
The Nationals are proposing a raft of policy changes aimed at reversing the trend of declining manufacturing over the last four decades.
They say a stronger manufacturing industry will help develop regional parts of the country and that it makes strategic sense for Australia to be developing larger populations right across the country.
The policy paper sets a goal of doubling the number of Australians employed by manufacturing by 2035 to create 800,000 new jobs.
“This is an ambitious but achievable goal,” the paper says. “If we were to lift the number of Australians employed in manufacturing by 800,000 by 2035, we would achieve around 10 per cent of Australians employed in manufacturing, which is the share of people employed in manufacturing in the United States.”
Policy to Raise Australian standards
Australia has the second-lowest share of its economic output coming from manufacturing among developed nations. Only Luxembourg has a lower share of its economic output devoted to manufacturing.
The nine-point plan to double employment in Australian manufacturing includes:
- Taking countervailing action to protect strategic industries where subsidies in other countries have an adverse impact on Australia’s ability to develop strategic industries.
- Increase trade promotion efforts and grow exports for manufacturing industries.
- Expand the remit of the Regional Investment Corporation to include new low-cost, long-term finance to strategic manufacturing industries.
- To expand development in the regions, the paper proposes creating decentralised Offices of Regional Manufacturing in Gladstone and Newcastle.
- Provide tax incentives including accelerated depreciation to encourage investment in manufacturing capital, and in research and development.
- Strengthen Australian government procurement policies to back Australian manufacturing first.
- Facilitate early exposure to trades and harmonise our qualifications and employment conditions.
- Invest in reliable and affordable energy and in strategic infrastructure that can support manufacturing, including in coal and gas-fired power.
- Fund exploration to find a new oil province in Australia to replace Bass Strait.
The paper seizes on both the threats and opportunities created by the covid-19 pandemic, which exposed Australia’s vulnerability to global supply chains and its reliance on other countries for manufactured goods, particularly for health services.
“It is not healthy for China to have such a dominant position in so many key global commodities,” the paper says. “Australia should be part of a global effort to diversify supply chains so that the global trading system can be more resilient.”
Expensive electricity impedes development
But Senator Canavan says the main barrier to manufacturing strength over the past decade has been high energy costs.
“The way to get power prices down is simple,” Canavan says. “We need more supply of affordable and reliable power. Intermittent renewable power is not the answer to restore Australia’s manufacturing strength.
“Australia needs to build modern coal-fired power stations to help manufacturing industries. This is why the National Party backs the delivery of a coal-fired power station in Collinsville in North Queensland. But more will need to be built.”
The problem is that the election of Joe Biden as United States President has sent the Morrison Government off in a different direction as it seeks to re-align itself with the international zeitgeist.
The move is now on to find “a path” to zero-net emissions by 2050.
The problem is a sovereign manufacturing policy and zero-net emissions are incompatible unless there are technological advances, and the battle lines are being drawn for one of the most crucial policy debates in recent political memory.
