by Patrick J. Byrne
Morrison should announce plan for expanding manufacturing expanding to 15% of GDP by 2035:
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- Creating around 1-2 million full-time, well paid jobs.
- Cith $1 trillion invested by government, new development bank, commercial banks and equity.
- Securing Australia’s economic and strategic future.
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Scott Morrison has announced the fast-tracking of around $72 billion in major infrastructure projects, but what he needs to announce is a plan to massively lift Australia’s manufacturing sector to 15 per cent of the economy by 2035.
In a speech to the Committee for Economic Development of Australia (CEDA), pre-released to The Australian, he said 15 priority infrastructure projects would include Inland Rail from Melbourne to Brisbane, the Marinus interconnector electricity link between Tasmania and Victoria, the Olympic Dam mine extension in South Australia, dams and emergency town-water projects in NSW, rail and iron ore projects in Western Australia and electricity infrastructure.
His speech comes prior to the handing down of a review into the Commonwealth Environment Protection and Biodiversity Conservation Act, which is expected to recommend cutting green tape to halve approval times for projects to 21 months.
This is the next step in the Government’s post-covid19 recovery plan.
However, by far Australia’s greatest needs is for Mr Morrison to announce a national industry-building program to more than double Australia’s manufacturing sector to a targeted 15 per cent of the economy by 2035.
A clear target and time frame will tell industry that the Government is serious. Nowhere in the world has manufacturing just happened by the working of market forces alone. It only happens when a government says the nation is going to build manufacturing industries with government help and significant direction.
World Bank data shows that Australian manufacturing stands at 5.8 per cent of the Australian economy (employing a record low 872,000 people), well below Turkey and Greece. Manufacturing in the United States is 13 per cent of gross domestic product (GDP), in Japan it is 19 per cent, while in Germany it is 23 per cent.
Although the Prime Minister’s infrastructure proposals will create 66,000 jobs, if manufacturing were boosted to 15 per cent of GDP, this would see: another one million people directly employed; and a further 750,000 to 1.2 million employed indirectly. The Industry Capability Network (2016) has estimated that $1 million in manufacturing output supports between $713,400 and $1.2 million in related economic activity.
(Conversely, when manufacturing industries are lost to Australia, many full-time, well paid jobs are also lost.)
About 85 per cent of manufacturing jobs are full time and are well paid.
The multiplier effect of manufacturing is stronger than in any other sector of the economy, because these industries act as “anchors” that stabilise whole supply chains. Specialised, high-technology manufacturing sectors have developed, elongated supply chains. In the U.S. automotive industry, the final jobs multiplier for original equipment manufacturing is 10 to one.
The loss of automotive was an industrial catastrophe for Australia. The industry is in a state of technical flux and new opportunities in design and production techniques are emerging, which Australia can exploit. The Government needs to ensure that it gets hold of the Holden brand to ensure that it doesn’t disappear; it could be the node for recovering an important industry.
Once it has set a 15 per cent target for manufacturing, then the Government needs to bring defence and industry groups together to determine strategic priorities: that is, industries that reduce Australia’s reliance on unreliable, strategically vulnerable global supply chains.
Industries need to audit their supply chains and, if found to be vulnerable, there should be an assessment as to whether Australia can produce substitute products.
Strategic industries should include important defence products, pharmaceutical and other medical supplies, transportation and agricultural equipment sectors, machine tools, metals processing, advanced chemicals, some essential consumer goods manufacturing, telecommunications and transport, agriculture and food-processing industries, electricity and liquid fuels.
In turn, key industries need to advise the Government on their needs to firmly establish Australian-owned, or majority-owned, domestic operations. This includes specialist finance, low-cost electricity, restrictions on foreign takeovers, new trade policy to limit/restrict certain imports, transport, skilled workers, government procurement programs, assistance when there are major currency fluctuations.
The states need to be involved to avoid downward competition for industries.
In the next six months, many more businesses may fail (here and globally) and many jobs lost across many sectors. There could be significantly higher unemployment and a lower property market.
Further, supply chains may become even more problematic with covid19-induced industry shortages globally, while China is demonstrating a determination to punish the Australian economy for political reasons at the same time that the United States is being strategically weakened.
Australians are waking from a long slumber and becoming deeply aware of the nation’s economic and strategic vulnerability. Now is the time to announce nation-building plans for a wide range of major new industries.
Patrick J. Byrne is national president of the National Civic Council.
