Diversifying the economy through sovereign manufacturing

While manufacturing has shown resilience and agility in the face of the pandemic, the pathway to the Australia-based manufacturing capability the Government seeks – where we are able to “build what we need” and “rebuild our proud manufacturing industry” – is still somewhat unclear.

The manufacturing sector’s ability to support economic diversity and an expanded industrial base will be tied to policies and funding. These will need to support the onshoring of manufacturing ecosystems that are currently import reliant, enable access to the productivity boosting technologies which are currently designed, built and shipped in from overseas, and foster the skills and capability within our own labour markets to create the future-focused industries that Government aspires to – such as clean energy production and critical minerals.

Since Labor’s election campaign, the sector has been focused on the highly anticipated $15b National Reconstruction Fund (NRF) However, this Budget provides little detail on its practicalities. We understand it will be established by the Department of Industry, Science and Resources (DISER) and the Department of Finance, and that it’s expected to generate revenue from investments and stimulate private sector investment.

Priority investment areas have been identified as: resources; agriculture, forestry and fisheries sectors; transport; medical science; renewables and low emission technologies; defence capability; and enabling capabilities. Allocations have been made to the following six sub-funds:

• $3 billion for the Powering Australia Plan;
• $1.5 billion for medical manufacturing;
• $1 billion for value-adding in the resources;
• $1 billion for critical technologies;
• $1 billion for advanced manufacturing; and
• $500 million for value-adding across agriculture, forestry, fisheries, food and fibre.

But policy and legislation to design the NRF are still subject to public consultation – with hopes legislation will be introduced by the end of the year. The fund is then expected to begin investing from July 2023. This is a blow for manufacturing businesses desperate for surety; many struggling with continuity of supply, others facing 12 to 18-month timelines on the delivery of strategic capital equipment purchases which are required to establish a “future made in Australia”.

Grant support from the previous Government through programs like the Modern Manufacturing Initiative (MMI) offered unprecedented support for industry, a precedent the current Government is seeking to redress through grant program audits, reversal and reallocation of uncommitted grant funding, and formal confirmation that the third round of the MMI will not proceed. Uncommitted funding from the Entrepreneurs’ Program will also be reprioritised to the NRF.

For industry though, it seems the period of uncertainty in government grant support has seen little clarification through this Budget, as we’ve not yet seen funding announcements on future manufacturing focused  grant programs under the new Albanese Government.