PM picks winners in $1.5b manufacturing strategy
Phillip Coorey

The Morrison government has settled on six priority areas it believes represent the future of Australian manufacturing and will spend an initial $1.5 billion encouraging their development as part its post-recession plans.

In the latest pre-budget policy announcement, Scott Morrison will on Thursday anoint resources and critical minerals, food and beverages, medical products, recycling and clean energy, defence and space as the manufacturing sectors he wants firmly established within a decade.

The Prime Minister defends the strategy of picking winners, saying Australia had a comparative or competitive advantage in each of the chosen sectors.

“The overarching objective of our modern manufacturing strategy is to build scale and capture income in high-value areas of manufacturing where Australia has either established competitive strength or emerging priorities,” he will tell the National Press Club in Canberra.

“The reality is we cannot and should not seek to reach global scale in a large number of sectors.

“This is an important lesson from other small and medium-sized high-income economies which have leveraged home-grown manufacturing into global success, such as Singapore, the UK, Germany and Canada.

“Don’t try to do everything.”

Mr Morrison says the government will partner with industry to draw up by April next year a plan for each sector – including benchmarks such as jobs created and levels of R&D and investment for each – for the next two, five and 10 years.

Industrial relations

Of the initial $1.5 billion, to be reconciled in next Tuesday’s federal budget, $1.3 billion will be used for grants to encourage businesses to engage in collaborative projects with other businesses or research institutions, commercialise ideas, and integrate into local and international supply chains and markets.

He will urge all parties – governments, industry, unions, the scientific and research community and capital investors, including super funds – to back the 10-year plan by “pulling in the one direction”.

Mr Morrison will stress that the focus on the six areas of advanced manufacturing will not come at the expense of already established industry and manufacturing.

These, he contends, will benefit in a general environment of low taxes, investment incentives, low energy costs and “flexible” industrial relations, all of which will be contained in the budget.

The budget will also contain enhanced R&D incentives and an investment allowance for business.

“Everyone gets a solid foundation,” said Industry Minister Karen Andrews, who was instrumental in the design of the strategy.

Two weeks ago, Mr Morrison announced an interventionist plan to effectively swamp the east coast with cheap gas to bring down electricity and gas prices.

Wednesday’s decision by the NSW Independent Planning Commission to give conditional approval to the controversial Narrabri coal seam gas basin plays into this gas strategy. Narrabri is one of five basins the federal government wants developed.

Cautiously supportive

“If you’re not for gas, you’re not for jobs in our manufacturing and heavy industries. For many manufacturers, it is half the problem,” Mr Morrison will say on Thursday.

Federal Labor was cautiously supportive of the Narrabri decision, saying the NSW and federal governments must now demonstrate the project will meet all environmental standards and ensure communities’ concerns are thoroughly addressed through rigorous and transparent processes.

Thursday’s manufacturing announcement will also include an element dedicated to sovereign security after the coronavirus pandemic exposed shortcomings in the security of supply of critical goods.

Of the remainder of the $1.5 billion, about $107 million will be used to identify supply chain vulnerabilities with regard to critical goods and services and options to address them.

Options will include manufacturing these products domestically, underpinned by state or federal government procurement contracts, or locking in a guaranteed supply from “like-minded partners” overseas.

Medicines and medical equipment, food, chemicals and plastics will be the priorities.

“We cannot ignore the obvious. The efficiency benefits of hyper-globalisation and highly fragmented supply chains can evaporate quickly in the event of a major global shock like the COVID-19 pandemic,” Mr Morrison says.

“Armed with this experience, it is only sensible that Australia consider more options to guard against supply chain vulnerability for critical necessities and to secure us against future shocks.”

Mr Morrison says manufacturing should play a role in both the emergence from recession and in ensuring the economy becomes stronger than it was before.

The focus on resources and critical minerals as one of the six priorities is likely to include the manufacture of batteries and renewable energy technology. The food and beverage focus will encourage the expansion of an already burgeoning industry in “safe, clean produce” while the focus on medical products “provides a key platform for commercialising new medicine and medical product breakthroughs”.

The clean energy and recycling initiative could include hydrogen and battery storage , as well as the initiative kicked off by Mr Morrison a year ago in which Australia is phasing out its exports of plastic, cardboard and other recyclables to developing nations with a view to recycling them domestically.

Mr Morrison will say that the defence focus will open more opportunities for Australian businesses to supply the defence sector while the fledgling Australian Space Agency will be developed further.

“We make things in Australia. We do it well. We need to keep making things in Australia. And under our plan we will,” Mr Morrison says.

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