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By: Michael Climpson
30 Oct 2020 3 min read
The data we have from the last 10 years as part of our ‘Federal Budget: A 10 year retrospective’ is a small and sobering piece of a much larger story. In 2010, the contribution to GDP was 6%, and over the decade it has declined to 4.21%. We saw majority of manufacturing moved offshore, particularly into South East Asia, to take advantage of lower cost economies.
Previously a powerhouse of Australian employment in the 30 years prior, Australian manufacturing only represented 8.6% of employment in 2010 – and 10 years later has decreased to 7%, or 852,800 people. In 2020, it was found that Australia now ranks last on the OECD rankings for manufacturing self-sufficiency – making us the most underdeveloped manufacturing sector of any industrial country in the world.
Excitingly, one of the largest investments in the Federal Budget – and in stark contrast to past investments in the manufacturing sector – is the $1.5b manufacturing strategy, including a significant $1.3b modern manufacturing initiative. In this, Scott Morrison has pointed to the strategies employed in Singapore, the UK, Germany and Canada – leveraging home-grown manufacturing in specific areas of strength. The message to the Australian market is that it’s not about what we make but how we make it and how we commercialise it.
However, what does this look like in action? We know the Government will invest in manufacturing where we are already strong and can compete globally. Locally, there is opportunity as well. The Government is the largest procurer in the Australian marketplace, and there is a real opportunity to drive investment in the sector simply by placing their dollar here. According to the National Association of Manufacturers, with every $1.00 spent on manufacturing, another $2.74 is added to the economy.
In our report we cover:
We were initially writing the ‘Federal Budget: A 10 year retrospective’ report before COVID-19 as an advocacy piece for more industry investment and support. Of course, the way the year started is not the way the year is ending. Many sectors that had been left to their own devices are now key for our recovery. Sovereign capability. Jobs. Digital economy. Modern manufacturing. Renewable future. Deregulation. Innovation. These are the terms we will use as we settle into COVID-normal.
Our report looks retrospectively at 13 different industries, the investment made into them by Government and their contribution to GDP. This is then overlaid with the opportunity we see for industry in this new normal based on recent Government announcements.
With the Australian economy the weakest it has been in 23 years, Labor has handed down its third Federal Budget delivering its second consecutive surplus, and setting the Government’s agenda as we head into an election cycle.
COVID-19 has brought with it a tumultuous yet interesting time for the manufacturing sector.
There is an overlooked economic opportunity in Australia’s mid-sized businesses – with the right incentives and tax policies in place, they can grow in size, scale and reach. They can employ more people, collaborate with other Australian businesses, and better contribute to Australia’s bottom line.