Rebooting manufacturing will buoy the economy
The outlook for Australian manufacturing is looking bright – from consumers turning their attention to locally-made goods and the onshoring of supply chains, to the economic boost for specific sectors from the Australian Government’s AUD1.5 billion Modern Manufacturing Strategy. However, in a recent Rebooting Manufacturing roundtable leading manufacturers identified key challenges to be addressed before the sector can be fully revitalised.
The outlook for Australian manufacturing is “incredibly buoyant” at the moment as indicated in the most recent Australian Chamber–Westpac Survey of Industrial Trends.
Speaking at the Rebooting Manufacturing roundtable co-hosted by Westpac Institutional Bank and The Australian Financial Review, the bank’s chief economist Bill Evans said a range of factors are driving confidence in the sector, highlighted by renewed interest in domestic manufacturing from Australian consumers and businesses which have been impacted by the disruption of global supply chains.
Demand has also been boosted by expansionary fiscal policy as the federal government no longer feels constrained to balance the budget in the near term.
“The long-term deterioration in manufacturing as measured by its share of employment in the economy looks to have finally stabilised.”— Bill Evans
The federal budget saw the Morrison government’s $1.5 billion Modern Manufacturing Strategy dusted off again targeting the defence, food, medical, energy, resources and space sectors. Building on that was a $2 billion announcement around research and development, as well as an extension to tax incentives such as the instant asset write-off program.
Yet while the outlook looks bright on a number of levels, there are some challenges that need to be overcome before the industry will see an uptick in its total share of employment across the economy.
Founder of Jayco, Australia and New Zealand’s leading recreational vehicle (RV) manufacturer, Gerry Ryan says the biggest issue manufacturers across the nation are facing is a labour shortage exacerbated by closed borders and a lack of education and training opportunities.
Skills shortage a challenge
Ryan says the government has to “open up the gates to skilled migrants, to fill the gaps we have – as our biggest issue going forward is people”.
According to Ryan, there has been a surge in road trips domestically amid the ongoing travel restrictions. But despite upping the ante around training across the business, he can’t get enough skilled workers to meet this increased demand.
“If we’re looking to compete on the world market, we’ve got to get it through innovation and continuous improvement, so the government has to do more on education, in the areas that we’re lacking skills.” — Gerry Ryan
He highlighted a looming skills crisis across a number of sectors as skillsets are lost in certain sectors, due to businesses shutting down over the past 18 months and their workforces moving into other areas.
“That’s the biggest issue I think we’re all facing, and the only way we can grow rapidly – because it takes years to train people – is to act on skilled migration sooner rather than later,” Ryan says.
Mick Sorrenson, managing director of Boeing Aerostructures Australia, sees a major skills shortage in the trades. He says while Boeing does rather well with sourcing engineers and interns out of universities, the one area where “we struggle today, is the trade skills”.
Bearing this in mind Sorrenson suggests what the federal government could do is create a truly modernised national manufacturing classification system. This would involve working with schools and employers more closely and helping to build out career pathways for people entering trades in the manufacturing sector.
“Something the government and the training providers can do is look at what the base trade skillset we’re going to need is in this country. There’s a lot of overlap so we shouldn’t be getting too precious about being specialised in one area. Whether you’re building an aircraft, a train or a caravan – it is a set of core skills an individual’s going to need.”
Noble Endeavor
Executive chairman of multi-faceted manufacturing business NEPEAN, Miles Fuller, suggested the key is to get people seeing the industry as something to be proud of and who foresee it as a career.
“In Germany, you’d be very proud to be in manufacturing – it’s a really noble endeavour.”
Barry Irvin who is the executive chairman of local food and dairy company Bega Cheese agrees we need to build our skills, but also highlighted our need to be more innovative and smarter in our manufacturing processes.
“We are still behind the best in the world in manufacturing innovation and technology, we’re not where we need to be, and I think there’s a great opportunity to do more.” — Barry Irvin
And while the government can do more, Irvin says local industry can work smarter and more collaboratively across sectors, especially in regard to recycling and sustainability because that’s the way the world is heading and “there’s also a good economic path around circular economies that I think we need to embrace”.
Ryan agrees collaboration is vitally important across the industry and that comes down to “leadership and culture”.
“At Jayco, and with the other businesses I’m involved with, we’re trying to build that culture as well as a culture of learning,” Ryan says. “We try and collaborate with all our suppliers because unless they can grow and can continually improve with us, we’re going to be left behind.”
For Irvin, Australians embraced local manufacturers in the past year, especially in the food sector, because they “wanted to go back to brands that they knew” but he doubts this will last, especially as global supply chains return to normal and consumers become more price conscious again.
He says the key is to keep adapting and, ideally, be able to go into other markets and disrupt them, but “we have to create the margin and the opportunity and the skills base here”.
Beyond our shores
Sorrenson agrees that Australia has the opportunity to leverage its homegrown advantages in other industries, such as aerospace and defence, even if a lot of the manufacturing is done offshore.
At Boeing, the Melbourne-based R&D arm of Boeing is “punching well above its weight in terms of the capability of those engineers and the innovation they’re bringing to the global organisation and our local manufacturing facility”.
He says local engineers work on ideas and concepts for Boeing’s next generation products in aerospace and defence, and the local production arm is still building parts for the manufacturer’s 737, 747, 777 and 787 aircraft.
Sorrenson says the product life cycles are incredibly long on passenger jets.
“We built our first parts in 1994 and we are a sole source supplier for that aircraft and our 787 Dreamliner contract was Australia’s largest aerospace contract when it was first awarded.”
Defence sector opportunities
Commenting on whether NEPEAN, a leader in mining and industrial manufacturing equipment, might look to expand further into defence as the government opens up more pathways into the sector for local manufacturers, Fuller says he’s very open-minded and keen to explore the opportunity, but it’s still just a very small part of his business.
“Building products and mining equipment are really substantial and real,” he says.
Conversely, Sorrenson says defence is growing in importance for Boeing Australia as “we’ve been supporting the acquisition of platforms out of the US and delivering them to the Commonwealth, and then providing support services to ensure they are mission-ready”.
“There are many incentives being provided to encourage investment and we’re very keen and able to support our clients.” — Anthony Miller
One significant local defence manufacturing opportunity is the Boeing Airpower Teaming System, designed and engineered in Australia with advanced manufacturing and final assembly of the uncrewed aircraft to be performed in Queensland.
As for the future of local manufacturing, Westpac’s Bill Evans suggests it’s time to try and pick winners, “to try and find the areas that the government believes can most use its direct investment”.
Moreover, beyond the government’s current stimulatory programmes, chief executive of Westpac Institutional Bank Anthony Miller points out that the wider financial climate and historically low interest rates afford great opportunity.
“There are many incentives being provided to encourage investment and we’re very keen and able to support our clients,” Miller concludes.
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