Manufacturing is critical to our economy – how can we support the sector?

Michael Climpson 03 Jun 2019

Although the knock-on effects of the Australian automotive industry exiting our country are yet to be fully understood, the industry is evolving, and manufacturing continues to be a major employer and critical to our overall economy.

The pace of new technologies is accelerating, and manufacturers will require more investment in R&D than ever before to remain competitive in a global market. Our own research into mid-sized manufacturers demonstrates that the sector is resilient, and both sales and profitability are growing over recent years.

A good success story in this space is Redback Boots, an Australian footwear manufacturing company with its roots in the early 1900s. Specialising in work boots and army boots for domestic and international markets, Redback manufactures over 1 million boots a year. Key to their future success has been an investment in technology to better understand their customers and automate their operations.

Watch Mark Cloros, Co-founder and Director of Redback Boots, talk about the influence of technology and customer expectations on their business

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There are a number of challenges facing the sector. Energy, for instance, is a major cost for manufacturers and has significantly risen over recent years. As local manufacturers are competing with global markets, a rise in Australian energy costs cannot simply be passed on, and margins are adversely impacted. Any government intervention that is effective in reducing energy costs would be welcomed by the industry.

Download our mid-sized business report to read the full Manufacturing insight.

Here is a short introduction to our three recommendations to help boost the Manufacturing sector:

Supporting manufacturing R&D

Manufacturing punches above its weight in terms of investment in R&D – with one figure stating that $4.8b was spent by the manufacturing industry in 2013-14 – as a proportion of GDP this is roughly four times the economy wide average.

Free Trade Agreements should complement local manufacturing

Australians like to buy locally – but if a competing product from overseas is available at a significantly reduced price (for instance 100% of China’s exports to Australia are exempt from tariffs) then it becomes more difficult to compete.

Manufacturing to support regional growth and payroll tax relief

Manufacturing is ideal for regional areas with many businesses requiring a significant real estate footprint as well as providing employment for a range of skill sets and backgrounds. One way the federal government can support regional areas is to compensate state governments for the removal of payroll tax altogether for businesses that offer employment in regional towns. Governments should not be afraid to contemplate fundamental changes to antiquated taxes.

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