Interview – 2GB Breakfast with Chris Smith

Australian manufacturing capability and supply chains

Chris Smith: I said just an hour ago how, as part of the coronavirus recovery, we need to look at using our manufacturing industry in a different way. And this is also an issue that's been raised by Karen Andrews, the Federal Industry Minister.

Now, Ms Andrews says Australia has learned a lot during the coronavirus crisis - you're not wrong - including that we need to end our dependence on Chinese and Indian imports here. She says we need to make sure that we've got the supply chains in place because we're really very dependent on imports. And she says there needs to be support from consumers and we need support from businesses to rebuild the manufacturing sector.

I thought I'd have a quick word with the Minister. Minister Karen Andrews welcome to the program.

Karen Andrews: Good morning.

Chris Smith: This is a really, really intelligent thing to say and I'm glad you've got the discussion moving even if we haven't got through all of this. Haven't we been behind the eight ball in so many ways in terms of trying to get access to equipment we needed and being at the absolute beck and call of what was happening in China and India?

Karen Andrews: Well I think what the coronavirus has proven to us is that it's wrong for us to be totally reliant, or even reliant to a whole large extent on supply chains that come- bring products from overseas.

So it is a problem for us, it's something that we do need to address. But the positive thing that’s come out of this is a demonstration that we have a very strong manufacturing base and that they can pivot really quite quickly - they can upscale. Their issue has been, in some cases, getting access to the input materials that they need - so that's a problem and we need to make sure that we address that as well as making sure that we don’t just retain a strong manufacturing sector - but build it.

Chris Smith: Alright. Let's be truthful about this though. We obtain certain items from India and China because they're cheap. China in particular runs a slave trade system and so therefore they'll always do things cheaper than we can. If we want to not be at the beck and call of China and India and make our own pharmaceuticals for instance - and most of our pharmaceuticals don't come from here - we have to be prepared as a society to pay a lot more money than what we pay for our medicines now.

Karen Andrews: I think that that's something that consumers and businesses need to look at very clearly. We are a high wage nation, no one wants to change that. That means that we have to change the way we look at manufacturing and we look at Australian suppliers.

So last year, I started talking to the manufacturing sector in depth hosting a series of roundtables to look at what the future of manufacturing was going to be in this nation. And one thing that came out of that very clearly was that we couldn't just compete on cost, we had to start competing on value. And we have to start looking at what our niche areas are, where we have demonstrated capability, where we can build on that.

Now, since those discussions started we've had the coronavirus and that’s demonstrated another range of issues. So what I’m going to do is build on the work from last year, but look at it through the lens of what happens if we face another epidemic or another crisis where we know that supply chains are going to be disrupted and we know we're not going to have access to the materials that we've relied on in the past. How do we deal with that?

And part of that is you've touched on, Chris, is keeping a very strong and high level of storage capacity here. So we do have inventory levels for most medicines of about six months - so we need to retain that. But we also need to work with our pharmaceutical sector to see how they can pivot and how they can start producing different medicines, different pharmaceuticals if need be.

Now, that means the TGA has to be involved and there's a whole range of steps to go into that. But one of the things that I'm going to be looking at is how we make sure that our pharmaceutical sector can pivot.

Chris Smith: Yeah. And we should be able to supply PPE to every hospital, every private and public hospital as often as we can. We need to increase our supply chains on that and maybe produce that ourselves. And the same goes with ventilators really.

Karen Andrews: Yes, absolutely. So we did only have one manufacturer of surgical masks here in Australia that were capable- or were producing seven million masks per year and that was on two lines. They’re now working three lines 24/7 and there are over 50 million masks capacity per year - so it’s an enormous step up for them.

But we've also had other manufacturers come in – Detmold from South Australia, a packaging business buying machines and are looking to set up and start manufacturing the surgical masks and the P2 masks. And with ventilators we announced that we entered into a contract with Grey Innovation; $31 million dollars to produce 2000 ventilators. But there's many other manufacturers that have stepped up as well and they are more than capable.

Chris Smith: Yeah. And adapted.

Karen Andrews: Yeah. So it's very clear that our manufacturing capacity is there but we haven't used it.

Chris Smith: Yeah. What about manufacturing industries that we've since closed down and shut down and we don't produce ourselves. What- can you think of some that we could - after all of this is done and dusted - that we could re-engage and produce?

Karen Andrews: Well I'm happy to have a look at where we have lost some manufacturing capacity. Now, we all know that automotive has been affected but also some some of the TCF - textile clothing and footwear industries have been affected quite frankly now for decades – and a lot of manufacturing is offshore. Now, with textile and clothing, for example, that impacts on our capacity to produce some of the medical equipment that we need. Now, our existing manufacturers have stepped up, put their hands up and said yes, we can start producing that as well which is great.

So let's be sensible about this. Let's look at what our capacities are. Let's look at what we need and start rebuilding the manufacturing capacity that we have.

Chris Smith: Yeah. I like the sound of all of that and it's got us all discussing exactly what the new world will be when this pandemic is over. Minister, thank you very much for your time this morning.

Karen Andrews: It's a pleasure. Take care

Chris Smith: Okay. Karen Andrews, the Federal Industry Minister.