Economic sovereignty has an appealing ring to it, especially when Chinese social media users are helpfully describing Australia as a “giant kangaroo that serves as a dog of the US”. But when it comes to concrete plans to reassert Australia’s self-sufficiency, the Morrison government seems to have been caught on the hop, as it were. In her first address to the National Press Club today, Minister for Industry Karen Andrews put forward a lot of platitudes about the groundswell of support for Australian manufacturing in the wake of COVID-19, but had nothing to announce other than her support for buying locally. Lamenting Australia’s failure to add value to its resources and agricultural exports – as Andrews did today – is nothing new, and it is mildly depressing that the Coalition can’t seem to see past farm and quarry as sources of natural competitive advantage for this country. (What about our highly skilled workforce, for example?) It’s the Coalition that delivered the biggest blow to Australia’s manufacturing industry in recent years by killing off a domestic auto manufacturing industry suffering from a temporarily high local currency, and it’s the Coalition that is still proposing to cut almost $2 billion from the R&D tax-incentive scheme. The truth is, Andrews has a very ordinary story to tell.
To be fair, last month Andrews did announce some $215 million for 200 projects in the government’s Manufacturing Modernisation Fund, and yesterday she announced a new industry matchmaking service, developed by the Advanced Manufacturing Growth Centre, to bring together manufacturers, suppliers and customers after COVID-19 disrupted global supply chains.
But today’s speech was quite negative. Andrews spoke a lot about what Australian manufacturers should not do (try to be all things to all people) and could not make (the iPhone). “While COVID-19 has brought issues such as sovereign capability to the forefront and, frankly, exposed gaps in our manufacturing,” the minister said, “I am not suggesting that complete self-sufficiency should be our goal.” Most importantly, Andrews ruled out any big shift back towards protectionism or an interventionist industry policy. “The first point I would make about the future of manufacturing is – it must be enterprise driven. We are not looking at nationalising industries or proposing government-owned entities. History has proven the folly of that approach.”
Andrews sought to deflect criticism of the death of the car industry, saying that while it has “attracted media headlines, the fact is that many other sectors have been succeeding and growing in recent years”. For example? Food and beverage manufacturing has had 11 quarters of consecutive growth. The chemicals sector also grew at an increasing rate in April, apparently. It’s not a great record to point to after nearly seven years in government.
Andrews said her vision for manufacturing was “not about re-creating the past, or reliving a golden era,” which is great, but talking up the prospects of an Australian space industry, for example, has also been going on for a long time and does not provide much hope. Nor does the tens of billions pumped into subsidising local shipbuilding in South Australia under a hastily struck $80 billion (and rising) pre-2016 election deal with a French submarine builder, which appears to be going badly off the rails even before construction starts.
Karen Andrews had no answers as to how a high-wage economy like Australia’s might rely less on imported manufactures from lower-wage China, beyond exhorting locals to look at value and not just cost. Without veering too heavily into protectionism or embracing #DecouplefromChina, it would be a very good thing if Australia diversified its overseas trade, particularly as the relationship with China seems set to deteriorate, with Bloomberg flagging that wine, dairy, seafood, oatmeal and fruit are all candidates for further import tariffs. The Australian reported [$] that Scott Morrison and Indian Prime Minister Narendra Modi would cement new agreements to develop reliable supply chains in key strategic sectors, including medical goods, technology and critical minerals.
Australia will have to do more to support local manufacturers. Tweaking Commonwealth procurement guidelines, and adding in a new industry matchmaking service, is not going to cut it.