As supply shortages continue and trade tensions remain high, the gap in Australian manufacturing has never been more obvious. It’s no surprise Australian businesses, and the economy, are feeling the fallout with our current dependence on the global chain exposed by COVID-19.
During the COVID-19 outbreak and the many months that followed, Australia suffered stock shortages, prolonged shipping periods, as well as higher taxes and tariffs on imports and exports imposed by our trade partners. It is clear our dependence on outsourced manufacturing puts us in a vulnerable position when the unthinkable and unpredictable occurs.
“Slower production rates in international factories, including those in the USA and Europe, combined with delays in shipping and strict health protocols on imports, has put pressure on local Australian supply chains,” said CEO of online machinery marketplace Machines4U, Steve Krebs.
“Many machinery OEMs have felt the sting of supply shortages, and have had to evolve into the hire game in order to survive,” he added.
But it hasn’t always been this way. Before Australia started moving toward a dependence on the global chain, we had our own manufacturing industry which produced high-quality, long-lasting products on our own shores. The days of “Made in Australia” have since ended, but many are calling for the return.
Of course, the reason for Australia’s dependence on the global chain is well founded with local manufacturing costing much more in production, warehousing and wages. Offshore manufacturing is cheaper and up until recently, has allowed us to benefit from improved inventory levels, inexpensive retail prices and higher stock availability.
In saying that, in light of recent global events our needs have changed and the Australian federal government is responding.
Push for Local Manufacturing Backed By Federal Government
As previously stated, the biggest hurdle for Australian businesses to produce goods onsite is the cost. It’s much cheaper to 1. outsource production, 2. ship it back and 3. sell it in Australia, rather than produce the product locally. But, as the global market shifts and continues to showcase vulnerabilities, Australia will need to pivot and be better prepared for the future.
This was brought into the spotlight in March 2021 when Australian Prime Minister, Scott Morrison, attended a manufacturing forum. The Prime Minister was able to hear directly from local manufacturers about how they’d been impacted by COVID-19. Local manufacturers from a variety of industries including, window and furniture manufacturers, as well as transport and defence manufacturers, all gave valuable insight from their own experiences during the COVID-19 pandemic.
This visit proved game-changing, as following the forum, it was announced the government would make a $2 billion investment into Australian manufacturing over the next 10 years. From this announcement, it’s clear the Australian government sees potential in the Australian manufacturing industry, and are placing more importance on helping businesses manufacture products locally.
The $2B Investment Modern Manufacturing Strategy
The $2B scheme comes under the Modern Manufacturing Strategy, and comprises several phases for bringing the reliance of manufacturing back into Australia. These phases include:
- Getting the economic conditions right for business: Ensuring Aussie businesses are supported in the recovery from COVID-19’s impact on the Australian economy.
- Making science and technology work for industry: Backing digital transformation and aligning research and innovation programs to priority areas
- Building national resilience: Strengthening our supply chains in order to make them more resilient to crises and other global impacts
This huge investment over a 10-year period is made up of several schemes outlined below.
$1.3B Modern Manufacturing Initiative
To give Australian local production a much-needed boost, the federal government is injecting $1.3 billion into the manufacturing industry via their Modern Manufacturing Initiative (MMI). This initiative has been created to deliver both immediate and long-term economic benefits by scaling up manufacturing businesses and supporting integration into local and international value chains.
$107.2M Supply Chain Resilience Initiative
The Supply Chain Resilience Initiative is the Federal Government’s response to the fallout of the COVID-19 pandemic. The initiative will help better position Australia to handle future supply chain disruptions by investigating the current vulnerabilities, and addressing them with sustainable solutions.
$52.8M Manufacturing Modernisation Fund – Round Two
The second round of funding labelled the Manufacturing Modernisation Fund is $52.8 million which will go towards supporting small and medium Australian businesses within the manufacturing industry.The funding will be distributed to successful business applicants in order to transform the manufacturing industry with a more skilled workforce and supported job growth.
The federal government’s initiatives are now in place, and some have already started. With these initiatives leading the way, there is hope that Australia is on the path to a more localised production and manufacturing industry with less reliance on global chains. Without strengthening the local chain Australia will remain open to the vulnerabilities of the global market when unpredictable crises occur. The result of the government initiatives will be one to keep an eye on.