National Press Club Address - Canberra
20 May 2020
Ladies and Gentlemen, it’s a great pleasure to be here today at this critical moment in history to talk about a vital sector of Australian industry - manufacturing.
But first, let’s talk about a 92-year-old retiree called Joe Carmody who lives in a nursing home in Shepparton, Victoria, and his connection with frontline health workers.
This story is a bit of a twist on the ones we’ve heard lately.
Because around 38 years ago Joe, an engineer at the Ardmona Cannery, designed and made a machine to produce surgical masks. A machine of such quality engineering, that two of the three original machines were still operational when this pandemic began.
Joe exported his machines all around the world. He founded his own manufacturing business, Med-Con, and spent decades producing millions of masks, surviving in the Australian market against a flood of cheap imports.
It was Joe’s machines that our Army engineers and consultants came in to study as we worked with Med-Con - now run by Joe’s former son-in-law Ray Stockwell - to boost their capacity.
As Med-Con moved into 24-hour production, our teams went to work on the third machine, pulling it apart, creating thousands of digital images, modelling parts, and recreating hundreds of plans from original pencil sketches. And they also got that machine running again.
This story speaks to the continuity of generations of Australian manufacturers. Because one of the consultants we brought in on the project was Jason van Dyke. Four decades earlier, as a young apprentice, Jason had worked with Joe and Ray on the original machine.
Even more incredibly, in the space of less than nine weeks, those plans have been transformed into brand new machines by FoodMach - a company just down the road in Echuca.
FoodMach has a unique story itself as a pioneer of food production machinery, but they pivoted to this vital national task.
There’s a real synergy in the fact that FoodMach operates in a building that was used to support our effort during the Second World War.
And in another great chapter in this story, today’s the day Med-Con will receive its first new machine from FoodMach.
When I first called Ray at Med-Con in February, they were the only Aussie manufacturer of face masks and his normal annual production was around 2 million a year.
Now, by the end of this year they will have produced 59 million masks. They will have gone from 14 to 98 staff.
And they will have significantly strengthened our ongoing sovereign capability for this vital product.
I might add that Joe’s machines were exported to Finland, the US, the Middle East and many more places. So just imagine how many frontline health workers around the world are being protected right now by an item made through Aussie ingenuity.
It’s a great twist isn’t it? A retiree in Australia has saved the lives of doctors and nurses around the world because he had a go, he created something, he believed in his capacity.
Ladies and gentlemen, the Covid-19 pandemic has been a seismic global event that has challenged the status quo and disrupted lives and livelihoods across the world.
In preparing for today, it struck me that my friends in the tech sector use the word disruptor as a confident term. They wear it like a badge of honour, because they recognise that disruption is very often an agent of opportunity.
Today I really want to focus on the opportunities we can embrace and the confidence we can have as a nation going forward, specifically as it relates to the Australian manufacturing sector.
I am acutely aware that other industry sectors have their own unique challenges and opportunities going forward, but today I’m focusing on manufacturing.
First, it’s important that we recognise and acknowledge how far we’ve come and how well the Australian people – our families, our businesses, our community organisations and our governments – have dealt with the challenges so far.
We have set a standard and achieved an outcome that is the envy of the world.
It’s incredible to comprehend that it was less than three months ago, on the 27th of February, that the Morrison Government quietly and decisively acted to initiate our Emergency Response Plan. At the time, there were only 23 cases and no Australian deaths.
We were literally still putting out fires from one of the most devastating bushfire seasons that had exacted a heavy toll on our nation.
The World Health Organisation was still several weeks away from declaring a global pandemic. Restrictions were likewise weeks away, and terms like social distancing, “iso” and even Covid were not yet part of the lexicon.
But then a seeming avalanche of changes came amid the backdrop of heartbreaking outcomes in Italy, Spain, and then the UK, US and around the world.
The Australian people stoically rose to each challenge, worked cohesively, and stuck to the social distancing rules and restrictions.
Very rapidly – much quicker than anyone expected – we achieved that vital outcome of “flattening the curve”.
But, while we’ve achieved remarkable outcomes on the health measures, let’s not under-sell how tough it has been for the Australian people.
Let’s not minimise the personal economic toll that it continues to take on so many families and businesses.
So the last thing I want to do is suggest that this seismic disruption has been positive. This has been tragic for so many families, tough for many millions more and will have lasting consequences that we are only beginning to comprehend.
But what has been evident is that the Australian people are resilient, we are caring, we are resourceful, we are optimistic – and from all those things we can draw confidence going forward.
As we all know – there’s a long, hard road ahead.
One of the markers that our Government has set for that road is to secure our nation’s economic sovereignty by building an even stronger local manufacturing sector.
It’s fair to say that over the last few months, our manufacturers have displayed incredible ingenuity, resilience and collaboration in meeting the difficult challenges of our Covid response.
They have proved themselves vital, not just in the production of personal protective equipment, but also our food and packaging manufacturers who have ramped up production to meet demand during this crisis.
Perhaps their willingness to adapt and change is a reflection of the fact that manufacturing has faced its own existential challenges over many decades.
They’ve had to pivot so many times to meet the needs of a rapidly changing Australia.
While the decline of the car industry 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 due to the strong demand for personal care items, pharmaceuticals, cleaning products, toiletries and health supplements - much of which is made locally.
But, to be frank, we were not producing much in the way of PPE before this crisis.
Health tasked us with finding ways to quickly produce things like surgical face masks, gowns, face shields, ventilators and hand sanitiser.
There was a lot of scepticism at the start.
When we first began preparing for this crisis, I was told that Australia would not be able to make more than about 37 million surgical masks a year. We’re now expecting to produce more than 200 million this year.
I refused to accept the advice that Australian manufacturers would only be able to fill small gaps in supply.
Capability exists in this country. What was needed was a change in the culture of how we think about our capability, about how we challenge the status quo.
Frankly, what we needed was disruption.
Because, when they were called on, our manufacturers stepped up to deliver.
In fact, more than 640 businesses responded to our early Request for Information on capacity to produce or assist in the production of PPE.
Given things have moved so fast over the past few months, I thought I’d run through a few examples:
Firstly, Med-Con – who I mentioned earlier, and I’ll digress here, because this really is an example of how fast things have moved. After early discussions on their capacity to upscale, I put in a call to Linda Reynolds about the ability of our specialist Defence engineers to assist. They mobilised so quickly they had people at Med-Con within hours.They really did an amazing job working incredibly long hours in conjunction with the business. So I want to give Minister Reynolds and the Defence Force team a big shout-out.
In addition to Med-Con, we have Detmold Group, a packaging company, who have pivoted to produce 145 million surgical and P2 masks.
Clets Linen has become the first Australian manufacturer to pivot from making linen products to produce thousands of medical-grade surgical gowns.
Grey Innovation has worked with a consortium of local companies to produce 2,000 ventilators for intensive care units. ResMed has produced over five and a half thousand ventilators.
Companies like Ego Pharmaceuticals have significantly ramped up operations, with 24/7 shifts.
And Med-Tech company Stryker, with the help of our Advanced Manufacturing Growth Centre, has been working with a 130-year-old fabrication business, a 120-year-old Australian mattress manufacturer and a 100-year-old Australian caster company, to deliver portable Emergency Response Hospital Beds.
There are dozens more examples that demonstrate the adaptability and resilience of our manufacturing sector – so many businesses that mirror the ingenuity of Joe and his machine.
Now as we reach our targets here at home, we’re helping our manufacturers field enquiries from around the world. Our ventilator capacity, in particular, has been a key point of discussion with our embassies. Now that’s an amazing turnaround.
Ladies and gentlemen, just like our manufacturers, one of the strengths of the Morrison Government, which has come into sharp focus during this crisis, is our practical approach.
While scaffolded by a strong belief system and commitment to Australian values, we are not ideologues.
I have no desire to rake over the coals of Australian manufacturing and point the finger at past policy failures.
Long before this global pandemic, my Department and I - tasked by the Prime Minister - were working to change the fate of Australian manufacturing.
Long before this virus laid bare our need to secure economic sovereignty, we have been mapping the way forward and working, with a whole of government approach, to create the conditions for Australian manufacturing to grow.
Our goal has been to stem the decades-long decline and build on our comparative advantages and national priorities.
As most of you know, I’m an engineer by profession, and I like to break things down to figure out how they work.
In my assessment, many of the building blocks for our manufacturing sector are both complex and deceptively simple:
- Cheaper gas and electricity;
- A highly skilled workforce;
- Better alignment of Government services and reduced red tape;
- Greater collaboration between research and industry;
- Support for more good ideas to be commercialised;
- Improved access to export markets, especially for small and medium enterprises;
- And underpinning it all - lower taxes and a stronger economy.
As you can see, these critical building blocks cut across many portfolios – and that’s why a whole of government approach is so vital.
- Angus Taylor working to drive down energy costs;
- Michaelia Cash building our technical skills and training;
- Simon Birmingham expanding our trade and export networks;
- Ben Morton working to cut through red tape and regulation;
- And the Prime Minister and Treasurer committed to lower taxes and a stronger economy.
Of course, the three pillars of my own portfolio – Industry, Science and Technology – interact in a circular way to provide the cogs that will drive the pace of manufacturing growth.
Science and technology are the enablers of industry.
For advanced manufacturing in the modern, competitive world, they are more crucial than ever before.
I could fill a half dozen Press Club speeches talking about the future of science and research, or our plans to make Australia a leading digital economy.
But today’s speech is about putting manufacturing front and centre, which is precisely what the Prime Minister and I have been doing.
It’s been front and centre of our health response.
It’s front and centre of our economic agenda.
This is not about re-creating the past, or re-living a golden era. It’s a newer, richer and more highly developed industry that we’re cultivating.
We have a special taskforce as part of the National Covid Coordination Commission, which is feeding into the strong work my Department and I have put in over the past 18 months.
While COVID-19 has brought issues such as sovereign capability to the forefront and, frankly, exposed gaps in our manufacturing, I am not suggesting that complete self-sufficiency should be our goal.
There are many things Australia won’t and shouldn’t be making.
But it is clear we can’t just rely on foreign supply chains for the essential items we need in a crisis.
We can’t supply all our wants locally but we have to be able to supply, or at least pivot our production processes to produce the goods we need.
And we have to compete on value, not on cost.
More broadly, as I’ve said before, we need to identify our areas of both comparative and competitive advantage.
Our key sectors of comparative advantage could include our mining and agriculture technologies, critical minerals processing, and food and beverage manufacturing.
Our areas of national priority might include pharmaceuticals and med-tech, defence, energy technology, the emerging space industry and waste and recycling.
And of course, a developed advanced manufacturing capability is an enabler for all of these sectors.
Policy discussions are obviously ongoing, but there are a few points I want to make today about future directions.
The first is reflected in our recent Manufacturing Modernisation Fund.
This was a fund we promised well before the global pandemic, at the last election in fact, and last month I announced 200 projects worth more than $215 million.
Businesses are being backed to harness technology, upgrade equipment, upskill workers and improve their operations to boost productivity and competitiveness.
I want to stress this is not a handout. We’re backing businesses to back themselves. In fact, the Federal Government is contributing under a quarter of the total project costs. I know others criticise that fact, but I believe it is the strength of our approach.
It speaks to the optimism of our manufacturers that in the current economic climate, they are still very much willing to back themselves and plan for the future.
So 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.
Also reflected in the focus of the Manufacturing Modernisation Fund is the second point I’d make, and that is, technology and upskilling are essential ingredients for growth.
On this metric, manufacturing punches above its weight. Though the sector makes up 5.6 per cent of Australia’s GDP, it accounts for over 26 per cent of business expenditure on R&D.
But manufacturing can really benefit from a greater alignment of our science and research efforts with industry outcomes. Our investments in R&D need to be effective and targeted.
That doesn’t necessarily mean throwing more money at R&D. The Government already invests about $9.6 billion every year supporting science, research and innovation.
For the manufacturing sector, there’s also the significant contribution of non-R&D Innovation, which rarely gets the attention it deserves.
So many businesses are innovating every single day. They’re coming up with new ways of doing things, improving practices, adopting new technologies, inventing new devices. This doesn’t fall under the R&D banner, but it’s very much an economic driver.
Another vital driver for manufacturing is our export capability. It is difficult to over-state the critical importance of export markets to enable real growth.
Our manufacturing exports were worth close to $55 billion in 2019, which is up over 9 per cent on 2018.
In the first three months of this year we exported over $13 billion worth of manufactured goods, up 5 per cent on the same period in 2019.
But it’s also true that we currently export far too many raw materials that we have the potential to value-add to through processing and manufacturing.
We need to capitalise on this value-adding opportunity, particularly in speciality and niche areas like rare earths and critical minerals.
And here again, I point to the collaborative work being done with my colleague Keith Pitt in developing opportunities in our resources sector.
One of the other areas which I believe is absolutely crucial is simplifying red tape and regulation to fast-track interaction with all levels of government.
That’s perhaps the biggest positive impact we can make without further demand on taxpayer support.
Manufacturing Australia cites the fact that a factory can be proposed, approved, built and operational in America in less time than it takes to jump the very first approval hurdle in Australia. That’s simply not good enough.
I see a big role for governments in streamlining those processes and facilitating new project approvals or upgrades.
I think that’s one of the big lessons we take out of what we’ve achieved in our pandemic response.
We’ve seen what is possible if we facilitate, rather than over-regulate.
Things that would normally take years can actually be achieved in weeks when the will is there.
Ultimately we need all levels of government to work together to reduce the hurdles businesses face when they are seeking to invest.
In that sense, the collaborative approach the Prime Minister has created through the National Cabinet is a great exemplar for what can be achieved.
I’ve been pleased to similarly host regular roundtables with state manufacturing ministers.
We clearly need an alignment of government effort to capitalise on the very real sense of national interest that has driven both the public and parliamentary processes over these past few months.
For too long, governments have been duplicating, and at times competing with each other, when it comes to policy and service delivery for business and industry, wasting taxpayer dollars and causing confusion and frustration in the process.
We simply can’t return to politics as usual. We’ve proven what can be achieved.
Just as we’ve dedicated ourselves to an effective pandemic response, we need to put no less importance on building national manufacturing capability to ensure our economic sovereignty.
Procurement is one area that has been suggested to me as a lever.
Now, our Government changed procurement guidelines in 2017 for contracts worth over $4 million to ensure officials examine and understand the wider benefit offered by alternative providers.
State and local governments often procure directly from local manufacturers in areas like transport and health, where the Federal Government provides funding.
So again, a collaborative national process is crucial.
But I would point out that what we achieved with ventilator production and many other areas of PPE was done mainly through procurement contracts.
Similarly, I think consumer sentiment will ultimately encourage businesses to actively seek a higher proportion of inputs through domestic supply chains. The disruption in global supply chains has been a wake-up call for many businesses.
I know a number of businesses are actively looking at boosting local procurement because they know many Australian consumers are planning to closely examine their own purchasing decisions in the future.
I sense a groundswell of community support for Australian-made products, which is good news for local manufacturers.
Australian consumers know that, just as they’ve pulled together to achieve health outcomes in the national interest, the post-Covid economy will require them to pull together to achieve the national goal of a stronger local manufacturing sector.
There’s a real sense that in a post-Covid world, where norms have indeed been disrupted, there will be an adjustment of our fast, disposable, retail approach.
A return to quality over quantity. This sort of disruption would indeed be a great opportunity for Australian manufacturing to compete on value, not cost.
It’s also important to recognise that our manufacturing sector has evolved and looks very different to what it did 30, 20 or even 10 years ago.
Manufacturing consists of a number of speciality processes along the production chain – from design through to marketing. There are high-paid and skilled jobs at each step along the process and the modern factory floor is home to designers, engineers, scientists and tradespeople.
Parents, educators and young people need to know that old stereotypes of production line labour are not an accurate reflection of Australia’s vibrant manufacturing sector.
Our manufacturers are innovators, having adapted to many challenges. In fact, they have a lot in common with the proud disruptors of the tech sector.
Finally, I thought I’d finish with an example that illustrates how we can compete on value and quality, and it brings us neatly back to retiree Joe Carmody’s machines and our healthcare workers.
I’ll leave you with the words of Kate, a theatre nurse, who wrote to Med-Con recently via their website. She said:
‘I am a theatre nurse at Castlemaine Health.
‘Yesterday for the first time I used one of your Level 3 Green face masks. I was blown away by the quality. They are so soft!! I absolutely love them.
‘I really appreciate you working overtime to ensure that we have masks. Thank you so much!!
Keep up the great work!’
I heartily agree with Kate. Keep up the great work Australian manufacturers, this nation backs you all the way.