Labor will create a $1 billion fund to help innovative manufacturing firms transition into high value production and “build for the future” if it wins the next federal election.
The Australian Manufacturing Future Fund would offer equity, concessional loans and loan guarantees to manufacturing firms looking to grow their businesses and adopt new technologies, but that are unable to obtain private funding. It would seek to partner with the private sector to reduce the risk profile of the businesses.
Opposition leader Bill Shorten announced the plan at the South Australian Labor state conference over the weekend, saying that the state deserves a “vision, future and legacy”.
The proposed fund would operate in a similar fashion to the Clean Energy Finance Corporation, which was set up by the then-Labor government in 2012.
“Labor wants Australia to be a successful advanced manufacturing nation, but we recognise that firms need assistance to modernise and move into high-value production to make them globally competitive,” Mr Shorten said.
“The Australian Manufacturing Future Fund will help our local manufacturers grow, innovate, diversify and develop new opportunities.”
The Opposition pointed to a “finance gap” for SMEs in the manufacturing space, where these firms are unable to find private backing to transition and survive.
According to the Australian Industry Group, banks are imposing “especially stringent lending criteria” on the manufacturing sector, and are “downgrading” these industries, making access to finance more difficult.
Shadow minister for industry, innovation and science Kim Carr said this was the main problem the manufacturing fund would address.
“Manufacturers have enormous difficulties getting access to finance, and that’s been reported for some while. There’s a widespread acknowledgement from industry associations that access to finance is a major problem,” Senator Carr told InnovationAus.com.
“The most common barrier for innovation for all businesses is access to capital. This fund is about attracting investment. We need to put that plank in there to provide assistance at getting access to funding.
The fund aimed to help SME manufacturers transition to more advanced manufacturing, with Labor pointing to a car component maker re-tooling, food manufacturers investing in new equipment and metal fabricators expanding into pre-fabricated housing as examples of how the fund would dish out its money.
It would focus on more traditional manufacturing companies rather than emerging technology startups and tech players, but Senator Carr said older firms can still be innovative, and this is one of many Labor policies in the innovation space.
“This is another piece in the jigsaw for us – this is not the only policy we’re doing. There will be further support in terms of venture capital, science and research programs. This is another part of our overall innovation agenda,” he said.
Labor’s manufacturing fund was quickly rebuffed by the federal government, with Assistant Minister to the Treasurer Michael Sukkar labelling it a “union slush fund”.
“We’ve got no answers on how this money will be spent, who will determine it and what the criteria is. Bill, true to form, will use this to reward those people who he is beholden to,” Mr Sukkar said.
“[He] wants to use the tax increases on small businesses to build up a union slush fund that he can then use to reward his union mates.”
But Senator Carr said this is an immature response to an important issue.
“It demonstrates what imbeciles they are. If they think that’s a mature reflection on what is a desperate need for Australian industry then it tells you everything about their attitude to manufacturing,” he said.
Senator Carr said the Clean Energy Finance Corporation has since 2012 committed $4.3 billion across 79 transactions that have a total project value of $11 billion.
The manufacturing fund would give priority to “transformative investments” in the automotive and food manufacturing sectors. It would be guided by a public policy objective along with an underlying investment mandate which will be developed by Labor if it wins the next election.
The fund would work closely with manufacturers to identify potential opportunities, and apply “commercial rigour” when making investment decisions, with a focus on later-stage projects.
“The CEFC has highlighted what can be done and what a successful model is, with an independent board, strict investment mandate and long-term commitment,” Senator Carr said.
“It will have a particular emphasis on SMEs – that’s our priority. We need to have a broad spread of companies but we are recommending to focus on the auto component sector, food manufacturing and metal fabrication
The fund would have a benchmark rate of return, but this will be for across its portfolio, leaving room for the fund to provide funding to support declining industries.
Senator Carr has long been a supported of propping up local manufacturers, and the fund will focus on traditional industries adapting to technological change, rather than the innovative companies developing that change. But the shadow minister said these more traditional manufacturers can still be innovative and forward-thinking.
“Quite often these are industries that are capital intensive, and what they need to have is the latest technologies and access to markets,” he said.
“The traditional manufacturer is someone who is trying to apply the latest technologies and the latest management techniques, and they need the assistance to get the market reach, which is what the loss of major internationals is going to be most damaging for.”
The fund will cost $34 million over four years, but Labor said it constitutes an investment in financial assets, so it will not be included in the federal fiscal or underlying cash balances.
South Australia has been hit particularly hard by the decline of the automotive industry in Australia, with the closure of Holden, Ford and Toyota plants, and Mr Shorten said Labor’s new policy will help create new jobs.
“We’ve been witness to our economy changing dramatically in the last ten years. The advent in new technology, the change in global circumstances and in the manufacturing heartland of Australia,” Mr Shorten told the South Australian Labor conference on Saturday.
“In South Australia you have seen the rough end of change – the enterprises which have closed or just have to find new customers, have to constantly be re-engineered and changing work practices.”
“Under Labor, state and federal, South Australia will be at the front of the queue and you should be because you’ve got a marvellously skilled workforce.”
The federal government itself announced a $47.5 million Advanced Manufacturing Growth Fund in this year’s budget, which will provide SMEs with funding of between $500,000 and $2.5 million to cover up to a third of project costs that will establish or expand advanced manufacturing activities in South Australia or Victoria.
It’s part of the government’s $100 million Advanced Manufacturing Fund aiming to boost “innovation, skills and employment in advanced manufacturing”.
But this fund was slammed as being an “oversubscribed and underfunded advanced manufacturing growth fund” by the Opposition.
Senator Carr said a big part of the manufacturing fund and future Labor policies is ensuring jobs and skills are kept local.
“We have an extraordinary skillset here – I don’t want it to be all imported. People beat the drum about Tesla but it’s all imported,” he said.
“We want to be developing capabilities domestically. I want sovereign capabilities. There’s a lot more to come, and other work to be done in a range of industry sectors.”