Manufacturers support $1.6bn recovery blueprint

Companies from spaceships to crushed tomatoes have welcomed an initiative to resuscitate the manufacturing sector.

Economic growth fell to 0.5 per cent during the final three months of the 2019 financial year, leaving annual growth at 1.4 per cent, the slowest rate since 2009. Picture: AAP

Companies involved in everything from designing spaceships to filling cans with crushed tomatoes have welcomed an initiative to resuscitate the manufacturing sector and help the nation emerge from the COVID-19 downturn with a healthy base of manufacturers fuelling a growth in jobs and innovation.

Australia’s corporate vanguard, from the nation’s largest company CSL, to global ear implant maker Cochlear, beverages group Coca-Cola Amatil and fruit cannery SPC, leapt upon Scott Morrison’s targeted push to revive key segments of the nation’s manufacturing base.

The Morrison recovery plan using manufacturing to lead the nation’s economy from the depths of a recession and revitalising the phrase “made in Australia” was warmly welcomed by the business community.

In a pre-budget speech on Thursday, the Prime Minister outlined his $1.5bn blueprint to return to a golden age of manufacturing in the key industries of resource technology, food and beverages, medical products, recycling and clean energy, defence and space fields.

His plan comes as the latest evidence emerged of the deep hole Australia has sunk into, with economic growth falling to 0.5 per cent during the final three months of the 2019 financial year, leaving annual growth at 1.4 per cent, the slowest rate since 2009.

It is expected to trigger downgrades in the outlook previously offered by the Reserve Bank and the federal government, which had expected growth of 1.8 per cent and 2.25 per cent, respectively.

Reserve Bank assistant governor Luci Ellis said the economy would “take several years” to return to its pre-pandemic path, raising fears of a protracted recession and limp growth. Following the release of the RBA’s quarterly economic outlook, Dr Ellis painted the global economic crisis induced by COVID-19 pandemic as a “shock without modern precedent”.

Meanwhile CSL, the biggest company on the ASX, welcomed the manufacturing revival policy, but said the strategy, to meet its objectives, must include tax incentives to ensure companies commercialised their R&D locally.

Ljubljana, Slovenia, March 3, 2011: A Coca-Cola can isolated on white background. The soft drink called also Coke is sold in over 200 countries worldwide.

“We were pleased to see the Prime Minister acknowledge today the critical contribution that the Australian medtech and biotech sectors can, and do, make to the nation’s economy,” a CSL spokeswoman said.

“(But) in order to meet the government’s stated objectives of building on Australia’s world-­recognised expertise in medical ­research and supporting medical manufacturing and domestic capability, grant schemes are useful but must be accompanied by more significant market-based policy initiatives.

“CSL looks forward to policy initiatives that strengthen the expertise and capacity we have in Australia, including tax incentives to promote the onshore commercialisation and manufacturing of intellectual property derived from domestic R&D. We are hopeful that schemes of this type will be included in the budget next week.”

Cochlear chief executive Dig Howitt said Australia should strive to have a competitive economy for manufacturing. He also said the plan needed to be accompanied by a tax incentive that encourage onshore commercialisation of R&D.

Companies have argued for reform of the R&D tax incentive to include manufacturing to stop the leakage of Australian ideas being commercialised overseas.

Mr Howitt said 85 per cent of Cochlear’s manufacturing was in Australia, while 95 per cent of its revenue came from overseas and, because Cochlear was based locally, it paid about 80 per cent of its global corporate tax in Australia.

“As outlined in the Prime Minister’s speech, to really drive medical manufacturing as a source of high-quality jobs in Australia, this initiative has to be accompanied by other policy settings that boost Australia’s competitiveness and attract capital. In particular, introducing a tax incentive that encourages onshore commercialisation of R&D should be a priority,” Mr Howitt said. “We agree that Australia should focus resources on sectors where we are strong or have a natural advantage. Australia is too small to be everything to everyone. Other similar sized countries have realised this and also focus investment on specific sectors.

“Cochlear has consistently advocated for a significant increase in funding for direct grant programs that target national priorities. A long-term time horizon is very important to allow businesses to plan and grow sustainably.”

Coca-Cola Amatil chief executive Alison Watkins said investment in manufacturing would create much-needed jobs.

“We look forward to participating in developing the plan for the food and beverage sector,” Ms Watkins said.

“We would also urge the government to continue with further action to help boost productivity, including investment in skills training and reforms to workplace relations and tax.”

Victorian food manufacturer SPC said Mr Morrison’s plan was welcome news for the food industry. “We need big ideas like this if we want to see real change in our country,’’ chief executive Robert Giles said.

“For many months now, we’ve been talking with government at all levels about how manufacturing will help lead Australia’s ­economic recovery and this announcement demonstrates there is a real and lasting commitment from the federal government. We are confident measures like this will ensure Australian manufacturing will become an enticing investment for the private sector to help turn companies like SPC into global businesses.”

Joe North, CEO of defence specialist Lockheed Martin Australia and New Zealand, said the manufacturing announcement underscored the importance of a robust industry capability to the nation’s economic prosperity.

The Australian chief of UK defence giant BAE Systems discussed the state of the industry with Scott Morrison last weekend during his visit to the Osborne shipyard in Adelaide where BAE has a $35bn contract to deliver nine anti-submarine warfare vessels.

BAE Australia chief executive Gabby Costigan said the stimulus measures would provide a boost for the industry amid the economic slump.

“As a nation we will be undergoing economic recovery now for quite some time, so attracting more investment in those key capabilities and investing in our nation now is incredibly important and the additional funding that defence can use and could be a big catalyst for growth,” Ms Costigan told The Australian.

Mr Morrison had already handed a major boost to the defence industry in June through a $270bn 10-year plan, boosting the nation‘s defence and deterrence capabilities.

“That‘s providing long-term opportunities for industry in Australia and particularly for highly skilled jobs,” Ms Costigan said.

“It underpins the chance for the nation to build that manufacturing resilience which I think is really important.”

The Australian Food and Grocery Council, representing the ­nation’s food manufacturers and suppliers, said the Morrison manufacturing plan confirmed the importance of growing a strong, resilient and competitive food and beverage manufacturing sector in Australia.

Chief executive Tanya Barden said this was a huge boost to the confidence of the sector, which ­directly employed 247,000 people and had room to grow.

“We are keen to create a road map for the future of the sector, working with the government to ensure that investment hits where it is needed, and roadblocks are removed,” Ms Barden said.

“What this investment by the government demonstrates is that they know that our sector is one of huge potential to scale up, particularly in export markets.”

Ms Barden said it would encourage companies to invest in Australia, to support jobs in local economies, particularly in rural and regional areas, and to take advantage of the nation’s supply of clean agricultural inputs and strong food safety system.

A spokesman for supermarket operator Woolworths said the plan was a “vote of confidence in Australia’s vibrant food and beverage sector”.

Business Council of Australia chief executive Jennifer Westacott said: “By playing to our strengths, the government’s strategy is designed to back in Australian manufacturers to help drive the recovery and rebuild a clever economy for the future.

Picture: NCA / NewsWire / Ian Currie

“Prioritising our focus on the areas where we already have a competitive edge, the areas where we could have a global advantage and the areas where we must be competitive means we can maximise our resources for the best ­results.”

Ms Westacott said Australia was in the right part of the world with the right products and services at the right time.

“This package will help businesses actively chase new markets, new investments and new opportunities so they can create the extra growth and jobs we need,” she said.

She said the BCA was particularly pleased to see that under the Modern Manufacturing Initiative the government would work in partnership with businesses and provide grants on a co-investment basis to stimulate private sources of capital. “The strength of the recovery will hinge on our ability to produce high-value products and export them into ­lucrative markets as well as play a critical role in international supply chains,” she said.

“We agree with the Prime Minister that the recovery must be business-led.”

Australia’s largest plastics producer, Qenos, said the government’s decision to prioritise specific industries was the right approach.

“Australian manufacturing can no longer rely on individual businesses doing the heavy lifting on their own, when jobs growth and economic prosperity require a modern, clear and innovative manufacturing strategy,” Qenos chief executive Stephen Bell said.

Manufacturers including Qenos, Orica and Incitec Pivot have been among critics of the gas industry on the east coast, complaining of problems striking long-term gas supply deals that they say have put the future of big industrial facilities under a cloud.

ADDITIONAL REPORTING: PERRY WILLIAMS