We have a golden opportunity to stimulate our manufacturing

With clear, concise and targeted reforms, Australia can have a vibrant manufacturing sector within a couple of years.

When the dust settles, we will see with greater clarity. There will be changes required for the better functioning of our country in a post-COVID-19 context.

For instance, we might form the strong opinion — if we haven’t already — that our manufacturing industry should be expanded significantly. But, in a highly regulated and high-cost environment, is this possible? And, if so, how?

It shouldn’t come as a surprise to hear that we are regarded as the world’s most China-reliant economy. This reputation is not just all about our export income (about a third of this came from China last year) but also about products imported.

There is nothing wrong with having a good trading relationship with other countries, of course. After all, where would we be without it? Nevertheless, when the pandemic hit, our dependency on China’s manufacturing became a concern. When China’s factories closed, interruptions to the supply chain caused shortages as well as significant public anxiety about future availability.

To quell concerns at the height of the panic-buying phase, it was announced on the news that toilet paper was manufactured in Australia. This came as both a surprise and a relief to many.

The Australian Manufacturing Forum runs an industry news website called @auManufacturing. This week it reprinted an article, originally published in The Conversation, written by academics Hongzhi Gao and Monica Ren.

Gao and Ren say many major chain stores are reliant on Chinese manufacturers for “much of what they sell, including exclusive home-brand items”, but countries are “waking up to” our “economic exposure to a single manufacturing giant”.

It is pointed out that Chinese manufacturing (including goods made from components made in China) accounts for:

● 35 per cent of household goods.

● 46 per cent of hi-tech goods.

● 54 per cent of textiles and apparel.

● 38 per cent of machinery, rubber and plastic.

● 20 per cent of medical goods and pharmaceuticals.

● 42 per cent of chemical products.

Ren and Gao say that since the outbreak, “volatility in the supply of products ranging from cars and Apple phones to food ingredients and hand sanitiser packaging” have been felt and, of particular concern, paracetamol supply has been restricted.

They argue that because Australia is “importing over 90 per cent of medicines” we are “extremely vulnerable” to major disruptions of medical products in the future.

So then surely, at some stage, our leaders will sit down and nut out a plan to revive our manufacturing capabilities. And when this happens, here is where we need to run a mile from the old way of thinking.

Please, no union-business accords, no “sitting around the table” and no industry-wide deals between the red and blue collectives, meaning the employee unions and the employer groups.

Instead, let’s have the light touch. Let’s see the Coalition government, just once, walk the walk and not just talk the talk on small government, the private sector, free enterprise and the market. We can look at what is working now and what isn’t, and make adjustments.

Big-bang reform, including grants and subsidies, is probably not even needed. However, a small delegation, comprising people experienced in the actual creation of business activity, should be formed.

(Note: this means people with experience starting and running their own business, rather than people with experience as employees in an industry group, university or business.)

This working group should be tasked with providing a realistic set of recommendations for achieving an environment in which our manufacturing sector can flourish.

Business owners often report struggles with rent and unfair tenancy agreements, restricted availability of finance, red tape and labour costs, along with the complexity of the workplace relations system.

The working group could look at manufacturers in this country that make a profit. Yes they exist, and I know many of them.

They’ve mostly made the deliberate decision to avoid the enterprise bargaining system, or the worst traps within it, and this has been key to their success.

In contrast, the group might look at manufacturers that had bargained themselves through the decades into an expensive straitjacket, which they always regretted.

The bargaining system should be avoided and the manufacturing award might need slight simplification, too. There is one clause in it that always causes trouble, and that has to do with regular casuals having an entitlement to become permanent after six months.

However, it may be that employers, not understanding how easy it is to dismiss people, keep casuals on for too long because of the perception that they are dismissible, and they are paying a loading when they don’t need to and running up against a clause they do not favour.

Manufacturers in regional areas have lower costs and their employees find it easier to live on award wage levels, but still, there is a reliance on imported labour, and this is because many Australians simply won’t do the jobs that immigrants will.

I have always said that a reckoning was coming, and now that it is here, we need to seize the day.

There are problems within our systems, and sometimes the problem is actually a perception of the system, rather than the system itself.

But with thought, planning and targeted reforms, we could have a vibrant manufacturing sector within a few years.