With An End To The NSW Modern Manufacturing Commissioner, Where To Now?

The decision of the New South Wales government to axe the role of Commissioner of Modern Manufacturing last week came as a shock to many Australian manufacturers.

Not only had the crucial role been in existence for less than a year, but the Commissioner’s much-anticipated Modern Manufacturing Strategy report had not been published or her views shared with industry.

The question that is raised by this action, in Australia’s largest economy, is not so much ‘what do we do now?’ because manufacturing businesses are accustomed to ensuring they are agile and able to respond tactically.

The bigger question is ‘where are we headed?’

It has been six years since Australia lost its biggest value-adding, advanced manufacturing industry in the form of the car industry. Other nations could make cars cheaper and in greater variety than our Victorian and South Australian plants, and we reached the limit of taxpayer subsidy for an otherwise impressive industry.

But the successor to car-making was supposed to be modern manufacturing and advanced manufacturing. Manufacturing that aims for either higher value-add status – such as hi-tech component-making for defence, green energy and biotech – or modern manufacturing techniques where very smart people – along with machine learning, AI, rare earths, critical minerals and internet-of-things technologies – create unique abilities.

The need to plan for a future of manufacturing that encompasses these ideas is fairly important given Australia’s need for innovative and high-end solutions from green energy and water management to advanced healthcare and agriculture. 

How many of these requirements will we be able to produce ourselves, or how many will we be able to produce export earnings from because we domestically design and make innovative products that the world needs?

How does Australia compare globally?

Australia has a problem in this respect: as reported in the NSW Modern Manufacturing Taskforce Report of July 2022, Australia ranked last in the OECD for manufacturing in 2021-22, with just 6 per cent of GDP attributed to manufacturing (down from 11 per cent in 2002). This is compared to Singapore, 21 per cent, Germany, 18 per cent, Belgium, 13 per cent, Israel, 11 per cent, Canada, 10 per cent and the United Kingdom at 9 per cent. 

In the 1960s, Australia’s share of manufacturing was in the mid-20 per cent range.

Australia has a lot of lost ground to make up, as the shortfalls exposed by COVID-19 supply chain disruption showed us. Not all of the catch-up will be to do with labour costs or fancy new machines.

Australia has a high cost of labour compared to our regional neighbours, but in the advanced manufacturing field, the labour cost differential declines because the quality required means manufacturers are relying on high-skilled and qualified workers, many of them in the STEM-educated fields.

And access to the latest high-tech machinery is not difficult if an Australian firm wants to move to the high-value end of their sector. Access to rare earths and critical minerals is also not a problem for Australia, although they will continue to pose a problem if we do not refine and process them here.

I would even argue that financial assistance and incentives from government is not the only answer. Manufacturers with a success record and an ability to export might be helped to expand and achieve greater scale by a government loan or grant, but it’s doubtful that government involvement is going to create an industry or sector where it didn’t exist before.

Which leaves what role for government?

My view of the NSW Commissioner for Modern Manufacturing was she was in a great place to develop a strategy for the state – and by default, Australia – which would set out how we could use our high educational standards, our resources industry and our knack for innovation to offer a unique manufacturing proposition to the world.

One such unique offering could be sustainable manufacturing. On one level, this could be manufacturing that has the world’s best environmental and employment standards, and also it could include our ability to produce and use renewable energy sources such as co-located solar PV and batteries.

However, beyond energy and environmental standards, Australian manufacturing has an opportunity to re-emerge as a whole-of-life sustainability model. Under this model, we recycle everything into new manufactured goods, we preserve and recycle commercial water usage, we make our goods with renewable energy, we create sustainable and safe workplaces for employees and we build this into our manufactures. 

This approach is not only good for our environment and our employees, but Australia could build a unique branding for goods made and exported under such whole-of-life sustainability protocols. 

Many organisations, such as our own, are already pursuing these strategies and letting the commercial world know that this is how we operate. My argument is that Australia has such a high standard of STEM-qualified people, and they want to be in careers where there is an exciting future; they also want to be contributing to a better, cleaner world, and I believe we have a better chance of bringing our bright and innovative young people into manufacturing if they see it as sustainable and progressive rather than ‘dirty’ and a sector of the past.

Governments can’t come up with winning ideas – that’s up to the private sector. But government has a role to play in strategy and structuring and setting a direction in which business owners can head. So, it was disappointing to see the NSW government drop their office of Commissioner for Modern Manufacturing before we could see what her plan might be.

If we want manufacturing to thrive in Australia, businesses like Harrison certainly have to play their part. But so do governments.