Manufacturing plan is all froth and no beer

Clare O’Neil

The government has spent the best part of a month spruiking its budget announcement of $1.5 billion for Australia’s manufacturing industry, but when Australian manufacturers raise a glass to celebrate, they are finding that it is all froth and no beer.

In fact, it turns out that it will be many moons before any meaningful funding starts flowing. Minister for Industry, Science and Technology Karen Andrews admitted on Sunday that of this $1.5 billion the Government has announced, just $40 million will be spent this financial year.

That’s not a typo and there are no zeroes missing – just $40 million to support Australia’s manufacturing industry during the darkest days of our first recession in three decades.

Clare O'Neil
Clare O’Neil: Delays in rolling out manufacturing support is a massive problem

At best, this is a triumph of bureaucratic process over rational economics and good government. At worst, it reveals a government that doesn’t care about Australia making things, irrespective of what they say in front of a microphone.

This latest misstep is part of a long-standing lack of interest in Australian manufacturing. In 2014, I sat in Parliament genuinely staggered when Joe Hockey, then Australia’s Treasurer, dared Holden to leave Australia. They did, taking tens of thousands of good quality jobs with them.

The absence of a coherent energy policy has created huge damage to manufacturing businesses, for whom making basic investments has become a gamble on which of the government’s 27 energy policies will be one that gets implemented.

The abject failure to provide a skills pipeline for the industry, with around $3 billion being cut from TAFE and training over the past seven years, has resulted in 150,000 fewer apprentices and trainees in 2020 than there were in 2013.

Policy inertia and timid leadership from Canberra has left Australia exposed by the COVID-19 pandemic. As the world went into lockdown, we scrambled to ensure adequate supplies of essential goods like personal protective equipment. For many months now our businesses have been frustrated by supply chain problems made worse by a lack of local self-sufficiency.

Australian manufacturing had long been desperate for some real support – and a real strategy – from government.

The announcement of $1.5 billion in new federal funding must have seemed like a new dawn: a crucial injection of stimulus that could make Australian manufacturers more competitive, resilient and able to scale-up to take on the world – at least, that’s what the media release said. But behind the spin there is little substance and even less urgency.

Every innovation expert I have ever met with has impressed upon me one thing: your innovation system cannot properly function without a manufacturing sector to back it up.

So, when the sector goes into decline, we are not just losing good quality jobs. We are weakening our innovation muscle and jeopardising our economic future.

It’s not just manufacturing that needs urgent attention. Australia ranks ninth out of 11 comparable nations on R&D spending. The United States, Germany, Japan, Korea, Israel and Sweden invest two to four times more than us.

Between 2015-16 and 2017-18, government R&D expenditure fell 19 per cent in real terms.

If you ask the government about R&D, they will point to their budget announcement of $2 billion of funding for the Research and Development Tax Incentive, their flagship initiative to promote private sector investment in R&D. Yet this change was simply a reversal of a previous decision to rip $1.8 billion out of the scheme.

Businesses across the board have accelerated their use of digital technology this year as they sought to adapt to the circumstances of COVID. Clearly, this is a huge opportunity: some smart, strategic investment now could see Australia emerge as a world leader in tech and digital development as the economy kicks into recovery.

Instead we’ve seen a much lower ambition. Last week the Prime Minister said he wants Australia to be “the best at adopting” rather than innovating and creating new technology.

This is not just a missed opportunity, it sets us on a dangerous course to reap more downsides and less of the upsides of transformative, emerging technology.

Take artificial intelligence, which PWC estimates will deliver $22.9 trillion to the global economy by 2030. Over the next decade, many more jobs will change because of AI and automation.

It doesn’t have to mean jobs will disappear. AI will also create stacks of high-skill, high-wage, world-class jobs, and complement many others. The question is, how many of them will be located here in Australia?

Other countries are setting themselves up for future prosperity by investing in transformative technologies.

The US recently announced hundreds of millions more dollars towards AI. The EU has committed $2.3 billion, and France has earmarked another $2.3 billion to become a global AI leader. South Korea has announced it will spend $2.7 billion to strengthen its R&D in AI, with an ambitious plan to train 5,000 AI specialists a year by 2022.

Back home, the Morrison Government’s big-spending budget reveals just how small their ambitions really are.

Despite tens of billions of dollars’ worth of new spending, the government found just $20 million for funding AI research, less money than that set aside for stormwater drains on Christmas Island.

Australia is in its first recession in three decades. Getting our policy and funding priorities right has never been more important.

Manufacturing could be a powerful economic force emerging in our recovery, but we also know from past experience that manufacturing jobs lost during a recession may never come back.

Two very different potential futures lie ahead for Aussie manufacturing. At the next election, Australians will get to choose between them.

Clare O’Neil is the federal Member for Hotham, and shadow minister for innovation, technology and the future of work.

Do you know more? Contact James Riley via Email.

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