A message from Jens Goennemann
We do not know when the federal election campaign will start officially, so I will use this space to share a handful of manufacturing related thoughts for whoever forms the next federal government.
Over the last decade, there has been bipartisan appreciation for manufacturing – evidenced mostly by lip service rather than bold instruments. However, it is a start.
It is by no coincidence that advanced economies overwhelmingly have a strong manufacturing base. Given those economies’ state of development and wealth, it’s no coincidence either that their manufacturing contingent heavily features high-value, complex, and globally competitive products based on highly educated people and sophisticated technologies.
Such nations with their ability to make complex things do well in measures like Harvard University’s Growth Lab’s Economic Complexity Index and the International Federation of Robotics’ industrial robot density per 10,000 workers.
Economic diversification, something lucky Australia inevitably must improve in, makes a nation better able to withstand economic shocks and commodity price volatility – or as it happens to be in our case, when certain commodities such as coal won’t be in the basket at all down the track.
Economic complexity, a measure of capabilities and knowhow expressed in the diversity and sophistication of a country’s exports, correlates with a more productive workforce and the ability to create and capture value.
The next government should appreciate the role of manufacturing capability in such advantages. It must appreciate that while a prosperous nation generally performs solidly in the generation of new knowledge, this is not the same as innovation which ultimately requires the realisation of new knowledge through commercialisation.
Industry policy in Australia needs to consider a basic market mechanism. Every economic success story – manufacturing or otherwise – ultimately has a paying customer. Those who partner with universities, including to migrate research breakthroughs into the market, do so because of the commercial outcome it creates.
Therefore, it is surprising to me that the distribution of the government’s $14.4B R&D funding is utterly out of whack in Australia with vehicles for applying research and research commercialisation pulling a very short straw.
Well-funded labs with fancy production gear alone won’t do the trick. They can be useful, but if the kit lays dormant then it is a waste. I have yet to come across a collaboration space at an Australian university or elsewhere which is buzzing, and I have seen quite a few.
Why don’t we turn this on its head? When industry partners don’t come to them, why don’t we go to the industry partner instead?
The funds of costly building and its maintenance are allocated more impactfully when spent directly at a manufacturer’s site. The utilisation of the gear is determined by a paying customer, not by research and publication desires. Not all research leads to something and that is well understood – and not all important breakthroughs have commercial applicability. However, those that do, deserve a better chance at success.
Australia has areas of strength and strategic importance. This has been understood by federal governments since 2013 with large priority sector overlaps, and Australia has limited public funds. Therefore, we must focus on things we do (commodities, food), want (health) or must (defence, renewables) succeed in. In all these verticals something is being made – being manufactured. Manufacturing capability makes Australia capable. The lack thereof causes the opposite.
Late last year, I learned from the Secretary of the Industry Department what a broad range of important activities are being undertaken with many capable and dedicated people doing a fantastic job. At the same time, the Industry Department does not have a great track record of delivering and implementing a compelling industry strategy. How can they, when the experts are with industry and not in the public service?
Why not try something different like an industry-led policy development and implementation to reside in Treasury or in the Department of Prime Minister and Cabinet? That brings it closer to those who wish to use bold industry policy as a strategic asset for the country. Let them own it and let industry drive it.
Finally, and once an industry policy and its implementation are in full swing, stop with the habit of governments axing or confusingly reworking policies that worked, simply because the folks from the other side of the aisle came up with it. Wealth in our superfunds grows over decades, and so does the manufacturing capability of a nation.