Finance Work How Australia is rebuilding manufacturing after COVID-19

How Australia is rebuilding manufacturing after COVID-19

Could the pandemic lead to a resurgence in domestic manufacturing? Photo: AAP
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It has been almost three years since the last Holden was made in South Australia.

The decision to close the factory left 950 people out of work and was a terrible milestone in a decades-long collapse in Australian manufacturing.

Where the industry once accounted for 25 per cent of Australia’s gross domestic product, it now accounts for roughly 5 per cent.

But that could soon change.

In exposing the frailty of international supply chains, the pandemic has underscored the importance of making stuff locally and revived hopes of a manufacturing resurgence.

As governments around the world shut down entire industries, companies went without crucial parts and hospitals scrambled to source enough masks and ventilators.

This only added to the panic surrounding COVID-19, but it also provided an opportunity.

After the Department of Industry issued a plea for help, distilleries swapped gin for hand sanitiser, packaging companies started making surgical masks, and a domestic consortium agreed to produce 2000 invasive ventilators.

In a matter of months, companies made changes that would normally take them years to achieve.

“It showed that manufacturing as a capability is highly regarded, has responded to the crisis, and provides better jobs even at difficult times,” Jens Goennemann, managing director of the federally-funded Advanced Manufacturing Growth Centre (AMGC), said of the crisis.

Briefing the media about a new AMGC report, Dr Goennemann said the pandemic had highlighted the importance of manufacturing in the minds of our politicians and created new opportunities for growth.

The report offers 10 ways that manufacturers can develop their business and is aimed at helping Australia become a more innovative and globally competitive country. It hopes to reframe manufacturing not as an industry but as a “capability” that extends beyond production.

And the timing of its release?

Just three weeks before the Treasurer has the opportunity to announce more funding for the sector in a widely anticipated federal budget.

“I hear the language that Australia will always be a manufacturing nation. That is good. So these are the words and we will hopefully see [more funding] on the sixth of October,” Dr Goennemann said.

Harvard University says Australia’s over-reliance on mining means the country is ill-prepared for the future.

The report feeds into AMGC’s overarching mission “to drive innovation, productivity and competitiveness across Australia’s manufacturing industry” – an aim that requires Australia to create value-added goods instead of exporting unprocessed materials.

It’s a solid aspiration for Australia, but one it has often failed to achieve.

Centre for Future Work senior economist Alison Pennington told The New Daily that for decades Australia has “substituted high-productivity, value-added manufacturing for a reliance on unsophisticated resources extraction”.

A recent report by the centre found that if Australia produced as much manufactured output as it consumed, it would generate an extra $180 billion in output and create almost 700,000 direct and indirect jobs.

“Our economy was already suffering from failures to support domestic manufacturing capacity in sluggish productivity, declining capital investment, less innovation, lost skills and declining job quality,” Ms Pennington said.

“But policy failures to develop our productive capacity pre-crisis are coming to a head. The pandemic should serve as a wake-up call.”

And a 2019 Harvard University study made a similar point.

Ranking Australia 93rd in the world for economic complexity, the study said Australia’s economy was projected to grow slowly as it was “less complex than expected for its income level”.

But green shoots are emerging.

The AMGC has invested $47.9 million into 78 different manufacturing projects since its inception in 2014 – an investment it estimates has created an additional 2176 jobs and boosted GDP by at least $900 million.

Provectus Algae chief executive Nusqe Spanton.

Queensland-based Provectus Algae has been a major beneficiary.

The startup grows specific strains of algae and develops them into products used in the food, pharmaceutical and agricultural sectors, such as the red pigment Astaxanthin, which turns farmed salmon pink.

AMGC has just given the company $250,000 to commercialise a novel manufacturing technology that will see it put on an extra 20 staff members and generate between $5 million and $10 million per year across three to five products.

In January it had a staff of five, but now it has a staff of 14 – making use of molecular biologists, mechatronics engineers, digital marketers, and UX designers to name but a few.

Strategic development manager Martin Asher said the coronavirus pandemic had created new opportunities for the company, as corporates were struggling to get hold of products from overseas and had asked Provectus to make them instead.

He said the support from the AMGC had enabled the company to “gain more traction to establish a greater international interest in our project”.

“Without that support, we wouldn’t have been able to gain as much traction as we have … to solicit the interest that we have now,” Mr Asher told The New Daily.

The company is currently going through its second round of seed funding and hopes to raise $3.5 million by the end of this month.

Mr Asher said it had received an “extraordinary” amount of interest from global investors.