Has Australia Turned its Back on Manufacturing?

Companies Offshoring, No Auto Makers and Government Shifting Focus to Other Industries.

Prime Minister, Tony Abbott had a vision coming into the election of 5 strong pillars, one of them being manufacturing.

I’d like to know his opinion of this pillar as the mother of all manufacturing sectors has announced unanimously that it doesn’t make business sense to manufacture in Australia. Where does he see Australia’s Future in Manufacturing and what Government should be investing in.

Car Makers couldn’t wait for the Productivity Commission to release their report in March (Which is not a definite timeline) and now Abbott wants the PC to expand their recommendations on how local component suppliers to the industry can ‘evolve’. I don’t see a point of a commission on productivity if there is no industry to commission productivity over.

The PC’s preliminary findings pointed out that Global Auto Makers want to align with Global Component Makers, so where does this leave the Local Component Makers – enter into the global market or at least emerging markets like Thailand and Indonesia where they supply over a million automobiles. Do they have the money or skills to compete and produce on a global scale and why wouldn’t they just follow suit if they did land a deal and shut shop in Australia and open up next door to the Assembly plant in Thailand/Indonesia but keep the design and IP here. No Government’s interested in backing them to the extent that they need.

Companies are already offshoring to stay competitive over the emotional ties to keep workers employed and being proud to claim Australian Made.

In 2011, prior to the Productivity Commission and the Liberals getting in power, Labour had a Manufacturing Taskforce to investigate what could be done to support jobs and a future for manufacturing in Australia. The Government had also established the Manufacturing Leaders Group to provide strategic advice on manufacturing to the Government, and to assist in implementing the Government’s response to the Taskforce’s recommendations.to investigate what could be done to support jobs and a future for manufacturing in Australia.

What were the results of this investigation and what advice was offered and what actions did the  Government take on that advice? Its as if the Government of the day don’t know what to do, so they appoint a 3rd party which advises them what to do and they do nothing anyway.

I understand that we have a $127B deficit with a trajectory of $650B but isn’t one of the best ways to pay off the debt to invest in sectors like manufacturing that will create wealth.

Victorian Premier Dennis Napthine is focusing on the Defence and Infrastructure industries to fill the void instead of working on preventing the void or filling it. It’s like they’ve given up and want to focus on other sectors. Infrastructure is a big issue in Victoria, when Napthine met with Abbott this week, he mentioned projects like the North-South Rail and other road projects and it will lead to a more productive manufacturing sector, so it should already be on the agenda rather than a priority now that Automotive will leave the state. Reading between the lines, Abbotts not interested in rail but there may be money for roads. Fracking is another industry that will see investment, jobs and growth, but Australians and the Victorian Government are very cautious about approving this type of mining and energy generation.

Governments say it isn’t good at running a business, so they privatise assets, like the utilities sector to pay off debt and prices for electricity, gas and water went up considerably, another pressure on business. They can’t run a business but they can run a country. Why can’t they buy back the Assembly plants and do what the Auto industry has been slow to do and build a green car like the Tesla, keep people employed and provide us with a solution to rising fuel prices. Even though we made cars in Australia, not every component was made here and the profits didn’t stay here either.

In 2012, Local Automotive Manufacturers produced 420,000 of the 1.12 million cars that were sold. Taxes like GST, stamp duty and other levies would be around $3k per vehicle x 420k = $1.26B. Taxes on the components sold to these Auto makers would at least be $1k per vehicle, which is another $420M. There’s taxes on utilities, capital expenditure, wages, vehicle financing.

Then there’s the 5% tariff on the other 740k of imported cars sold which is about $1B. Tariffs are implemented to restrict trade. A 5% tariff which is on average $1,000 to $2,000 on a sale of $20-$40k isn’t protecting anyone, its only benefits the Government’s bottom line rather than protect an industry. You go to any car dealer and they’ll drop $2k in a heartbeat to win your business.

So I don’t understand why Government say it’s not profitable to invest in manufacturing, specifically automotive. They had money on the table for Automotive but since it wasn’t enough to keep the automotive industry alive, so is Government going to put that money back into the coffers or redirect it into Manufacturing R&D and Project Grants for tomorrows manufacturing technology and industry. There’s many technologies we could develop and grow for our own interests but even then we see the IP of these technologies get sold off to foreigners instead of bringing them to the market and having Government fully back the R&D process through to production.