Make or brake: The critical test for Albanese’s manufacturing vision

Australians are about to discover whether Anthony Albanese can deliver on one of the most persuasive messages in his pitch to become prime minister: the idea that he can lead a country that makes things again.

“We need to make more things here in Australia, really, and have advanced manufacturing so that we can stand on our own two feet,” Albanese said on May 19. “That’s one of the lessons of the pandemic.”

IllustrationCredit: Simon Letch

Albanese knew this message resonated with voters. He believed it, too. He is serious about starting a new era of manufacturing. Yet the pandemic highlighted the challenges for Labor in achieving this goal.

The powerful lesson was that Australia did not have the sovereign capacity it needed to withstand an emergency. We did not have enough masks when the coronavirus struck. We did not have enough gloves. Gin distilleries switched production to meet demand for hand sanitiser. The Australian Defence Force was called in to help the only maker of surgical masks, Med-Con, triple its output.

You would think those lessons were already being applied to make sure Australia had a sovereign capacity in medicines and other essential products. But you would be wrong. By the time the election arrived, the previous government had yet to allocate about $150 million from the scheme meant to achieve that objective – the Modern Manufacturing Initiative.

Anthony Albanese announced a $100 million partnership with the Queensland government for a battery manufacturing precinct during the federal election.Credit: Alex Ellinghausen

Worse, companies were put through endless hoops while Canberra tried to decide what to support. David Sparling, the chief executive of Melbourne company IDT Australia, went through this hell.

“It was as a rollercoaster ride: intense periods of activity interspersed with long and frustrating periods of inactivity waiting for decisions to be made,” he says. “My hope is that the incoming government leads from the front and act on their initiatives to manufacture more medicines and vaccines locally in Australia, so we are better prepared for the next crisis.”

IDT is the only remaining manufacturer in Australia with a production line that can make active pharmaceutical ingredients (APIs), the core chemicals in most of the pills we take. While many pills are made in Australia, most rely on APIs that come from overseas with the ingredients already prepared.

So Australia is exposed to a national headache. It turns out that the key ingredient in many pain relief medicines, paracetamol, is an API and is almost entirely imported. Families saw this when the pandemic struck and customers snapped up children’s Panadol. The country had a sudden shortage of infant paracetamol.

Things became far worse after Scott Morrison declared vaccine supply was not a race. This was one of the greatest failures in the response to the crisis. Australia was in a frantic search to fix the weaknesses in medical manufacturing. The stand-out success was Morrison’s agreement with CSL to make the AstraZeneca vaccine in Melbourne, but it came with a fateful complacency when the government was too slow to sign the deals we needed for mRNA vaccines from Pfizer and Moderna.

Thrown on the defensive, Morrison and his ministers promised to make mRNA in Australia. They asked local companies to go through months of work to advance their proposals. In the end, however, the only winner was Moderna. The global giant will receive an unknown amount of federal cash to build a facility in Melbourne. Everyone else was shut out. CSL, the biggest Australian contender in the vaccine business, will pursue its mRNA plans in Massachusetts and South Carolina.

“There does not seem to be a faith in the ability of Australian industry to deliver and that is just unacceptable,” says John Blackburn, a former Air Vice Marshal and F/A-18 pilot who knows a strategic challenge when he sees one. As the chair of the Institute for Integrated Economic Research Australia, he sent a paper to the federal government in late 2020 about the need to diversify vaccine supply. He thinks it is not enough to rely on the Moderna deal. “You can’t have resilience with a single point of failure.”

For all the former government’s talk about local capacity, it put some Australian companies through several rounds of applications without results. IDT was one example. The unspent funds in the Modern Manufacturing Initiative are a measure of the decisions not taken, not only in medicine but in other industries that wanted help.

Will this change? Perhaps it is cheaper for Australia to import all the medicine it uses, along with so much else. But this is not what Albanese promised. He told voters he wanted to lead a country that made things again. One test will be what the government does with the Modern Manufacturing Initiative after it reviews all the promises the Coalition made. Another test will be how quickly it can put its election pledges into action.

Industry Minister Ed Husic will take a submission to cabinet with Finance Minister Katy Gallagher in the next few weeks to set up the $15 billion National Reconstruction Fund, one of Labor’s biggest election promises. This is meant to include $1.5 billion for medical manufacturing but not through grants: the fund will join commercial investors by supporting companies with loans and guarantees.

The investments are meant to generate a return for the fund, but they also expose taxpayers to risk. Some investments may fail. Then again, some industry grants have gone to companies that collapsed.

“A lot of this stuff will not be easy and we may fail,” Husic said in an interview this week. “We need to appreciate that nothing is perfect. What you learn from failure and apply from that lesson will build the next round of success.” He says he does not want a return to protectionism and that the world has changed from the days of Bob Hawke and Paul Keating. But he admires the legacy of John Button, a Labor hero for running an active industry policy as minister for a decade.

Australia has lost ground against other countries on research and development.

Jobs in manufacturing have shrunk from 25 per cent of the labour force in the 1960s to about 6 per cent today. The growth in services has been good for the country. Still, there is the nagging doubt that too much has gone offshore.

Australia cannot decide what submarines to make and cannot make cars at all. It cannot build enough dispatchable power to replace the power stations closing down. But it can build apartments at an incredible pace, even if some have cracks in the walls.

Is there a brighter future ahead? Albanese is serious about running a country that makes things again. Husic is putting that pledge into action. The cost could be formidable. But the cure for the national headache will not come quickly.

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