Scott Morrison’s national rebuild via $1.5bn budget push for manufacturing

Scott Morrison will announce a $1.3bn Modern Manufacturing Initiative to leverage co-investment across six priority areas.

Scott Morrison prepares his pre-budget address at The Lodge in Canberra on Wednesday. Picture: Adam Taylor

Scott Morrison will pour $1.5bn into revitalising Australian manufacturing through the COVID-19 economic recovery and unveil a strategy to boost large-scale production, develop new products and expand access to global ­markets.

The Prime Minister will use a major pre-budget speech to ­announce a $1.3bn Modern Manufacturing Initiative that will see the government leverage co-investment across six priority areas where Australia is deemed to have competitive advantages.

Manufacturers in the resource technology, food and beverage, medical products, recycling and clean energy, defence and space fields stand to benefit under the new framework, with the sectors picked based on World Bank and OECD analysis.

The government will also sit down with industry leaders to sketch out, by next April, detailed and specific “road maps” for each sector spanning two, five and 10 years in a bid to maximise success.

Key benchmarks will gauge progress across a range of measures — including jobs, research and development as well as investment — with the road maps to be informed by experts through the Industry, Innovation and Science Australia Board.

Speaking at the National Press Club in Canberra, Mr Morrison will argue the budget will be “necessarily different in scale to those we have seen for generations”.

“The budget will confirm the strong plan we have to recover from the COVID-19 recession and to build our economy for the future. To cushion the blow of the pandemic recession. To recover what’s been lost — the jobs, the livelihoods, the hours, the incomes, the customers, the clients. And to take new ground by rebuilding our economy for the ­future.”

Mr Morrison’s manufacturing strategy will be guided by three key principles — encouraging a more competitive business environment, better alignment of resources to play to Australia’s competitive advantages and the preservation of sovereign capabilities in “areas of national interest”.

He will also argue the plan will generate jobs and support rural communities, arguing manufacturing is “particularly important to regional economies in places like the Hunter region of NSW, north and central Queensland, Tasmania and regional Victoria”.

“We make things in Australia. We do it well. We need to keep making things in Australia. And under our plan we will,” Mr Morrison will say. “Manufacturing ­employs around 860,000 Australians, and prior to the pandemic it generated more than $100bn in value for our economy each year and over $50bn in exports.

“The overarching objective of our modern manufacturing strategy is to build scale and capture income in high-value areas of manufacturing where Australia has either established competitive strength or emerging priorities.”

The success of the manufacturing strategy will pivot on a range of broader economic policies supporting greater productivity, which Mr Morrison listed as “affordable and reliable energy, tax policy, industrial relations, training and skills development, cutting red tape (and) infrastructure investment, just to name a few”.

“Too often in the past industry policy has ignored these foundational elements in the vain hope that subsidies and work-arounds could make up for broader deficiencies in our economic settings.”

He said industry groups, workers, unions, superannuation funds as well as research bodies and scientists needed to be “pulling in one direction” over the next 10 years.

The new $1.3bn Modern Manufacturing Initiative will be accompanied by a $107.2m commitment to strengthen supply chains, with the government to work with industry to identify critical products.

An early focus will be placed on medicines and medical equipment as well as food, chemicals and plastics with funding to be available for businesses who identify supply chain vulnerabilities.

An additional $52.8m will be allocated to expanding the Manufacturing Modernisation Fund, which provides immediate assistance to businesses in priority sectors, with the government arguing it will allow an extra 150 businesses to invest in shovel-ready projects. Under the scheme, businesses can apply for grants of between $100,000 and $1m, with the expanded funding round to open before the end of the year.

Industry Minister Karen Andrews, who has spent the last year preparing the manufacturing strategy, said the IISA and CSIRO would take on prominent roles in modernising industrial capacity.

Prime Minister Scott Morrison working on his pre-budget address at The Lodge which will be delivered today at the National Press Club. Picture: Adam Taylor

Ms Andrews said the commercialisation of industry and research was an area “that we haven’t done well in the past”.

“CSIRO is going to be extremely important and I’m very keen to see the universities work with industry and CSIRO because what people forget about is that the I in CSIRO stands for Industrial,” she said.

Ms Andrews said the government’s plan set clear direction for the future of Australia’s advanced manufacturing industry.

“This is an opportunity for industry to come to us with what their projects are that will commercialise. But there has to be a level of scale in this. This is not just an individual idea, it’s got to show that there will be some benefits and line up with our national manufacturing priorities,” she said. The government will also work closely with “like-minded countries” to identify gaps in supply chains which Australian manufacturers can fill.

The Manufacturing Modernisation Fund will target manufacturers in the six priority sectors to help bring companies into the “current century”.

“We will look at how they’re going to digitise, how they’re going to increase their technology. It’s actually the science and technology component in the middle that this will be supporting.”

Ms Andrews said a whole-of-government approach, across training and skills, industrial relations and energy reforms, would be required to support Australia’s new age of manufacturing.

“The entire strategy has been built on the foundation of getting the economic conditions right for business. Tax policy, industrial relations, infrastructure, investment, trade. They form the foundation of all manufacturing businesses.”

The processing of rare earths and critical minerals, including in the development of batteries and other tech parts, will be a ­priority for the government, as well as growing established industries like the food and beverage sector.