Interview – ABC RN Breakfast

Unemployment forecast, Australian manufacturing capability and supply chains

Minister for Industry, Science and Technology Karen Andrews was interviewed on ABC RN Breakfast.

Fran Kelly: The economic cost of the COVID pandemic is becoming clearer, with unemployment officially forecast to peak at 10 per cent by the middle of the year as we heard earlier. This Treasury analysis comes ahead of Thursday's meeting of National Cabinet, where the Prime Minister and the premiers will start planning, quote: the road out to the other side of this crisis. And as Scott Morrison talks about the need to safeguard our economic sovereignty, thoughts are turning to rebuilding Australia's manufacturing sector to ensure more self-reliance when it comes to critical supplies, like medical equipment, for instance. But divisions are already emerging within government ranks over this issue, with some free market MPs warning against rejuvenating industries which they say are uncompetitive and costly for taxpayers.

Karen Andrews is the Federal Industry Minister. Minister, welcome back to Breakfast.

Karen Andrews: Good morning, Fran.

Fran Kelly: 10 per cent unemployment by the end of June, that's the Treasury forecast. It's a doubling in just one quarter. How long will it take to get that number down again? Do we have those projections too?

Karen Andrews: Look, we don't have those projections in much detail at all, Fran. What's important to note is that no one would’ve wanted our unemployment rate to hit double figures, but because of the JobKeeper program that we now have in place, it's not going to hit even higher levels, so that's a positive. But it is important that we do start looking at the road out of this. What is Australia going to look like post-COVID? And quite frankly, it's going to be very different to what it was six months ago. So that's the work that's ahead for us.

Fran Kelly: Okay. And how quickly should we bring it out too? Is 10 per cent unemployment a compelling argument for some- for starting to think about lifting restrictions to restart the economy, or should the health advice be the only advice listened to when it comes to opening up again?

Karen Andrews: Well, clearly the health advice needs to be the priority, because we don't want to risk a second wave of an outbreak at all. And health is clearly a priority for us. What we'll be looking at doing is trying to manage the economy the best way that we possibly can, so that we're in the best possible position to ramp up, to scale up as soon as it's advised by our health officials and our health experts that it's timely to do so.

Fran Kelly: Okay. You're working with industry to try and boost our manufacturing base after the pandemic. Is that driven by the need to generate jobs or is that sovereign protection? What's the driver for you?

Karen Andrews: Look, potentially it's both. So last year when this work actually started on building and rebuilding Australia's manufacturing. We were looking at the jobs of the future and how we created more jobs, and encouraged our young people in particular to look at Australian manufacturing as a viable job and employment option. Obviously, now that we're going through the issues with COVID, we're going have to look at how we can bring ourselves out of this situation from an economic point of view and grow jobs. So it's going to be a bit of both. But I think that we do have a very strong manufacturing sector, and quite frankly that's been demonstrated by their ability to repurpose some of their equipment and their processes to pivot and to pivot really quickly. So that's something that all Australians should be very proud of. Our reaction time was very fast.

Fran Kelly: Okay. We don’t have such a strong manufacturing base, though. It's contracted to 6 per cent of the economy, from around 40 per cent in the 70s. Yesterday on the program, we spoke with Paul Bastian, who's the Secretary of the Manufacturing Workers Union, who said we need to look at the gaps in local manufacturing in some key sectors. Let's listen to Paul Bastian.


Paul Bastian: There is a need, we believe, to establish task force in some of our key industries, such as food, defence, mining, and engineering. To look at two things: not just to see how we can localise our supply chains, but also to look importantly at our capability gap and how we might be able to fill those gaps in our manufacturing sector.

[End of Excerpt]

Fran Kelly: So Minister, can you explain for us what your level of ambition is for manufacturing here? Is it limited to becoming more self-reliant when it comes to critical supplies like pharmaceuticals and medical equipment, which we’ve seen the impact of that when the supply chain is interrupted, or are you looking more broadly at food, defence, mining, engineering? Maybe even at lost capacity like automotive and textiles?

Karen Andrews: So when I started looking at the ways that we could grow and develop the manufacturing sector in Australia, I started from the position that we can't be all things to all people, and that it's very difficult for us to compete on a cost basis because we have high wages here. So it's very difficult for us to compete with low wage nations. So we needed to be able to compete on value, which is quite frankly, the core of the concept, how we add value and how we produce products that are of a high quality - where our niches are. So we looked at where our historic strengths were, which is agriculture and mining, and quite frankly in mining we are world-leading. Then we looked at what the emerging areas were for us. Now, defence forms part of that and there's a lot of work already happening there. But we're also looking at other areas, such as space, for example. And we should not lose sight of that. But we should look at where our capabilities are. Now we are very strong in the med tech area, in some key areas. So let's start looking at that. Let’s start looking at pharmaceuticals. And if I can just make a comment about food - 25 per cent of our manufacturing is already food related and we have some key strengths there that we should make sure that we maximise.

Fran Kelly: Okay. But just look- just talk about med tech. We keep hearing we’re strong about it. We didn't have companies that were producing the kind of personal protective equipment we needed. We've now rebooted some companies as you've referred to, to do that for us. But the reality of the global economy is that goods like masks and gowns and gloves will always be cheaper to make overseas, and the same goes for pharmaceuticals. I mean the reason we import most of our pharmaceuticals from places like China and India is because they're much cheaper to produce there. How much do you think Australian patients would be prepared to pay for drugs to be locally manufactured?

Karen Andrews: Well I think that there’s a greater recognition now of the fact that in a time of crisis, which we’re experiencing now, overseas supply chains can be quite difficult to navigate. So I think that …

Fran Kelly: [Interrupts] Sure. No doubt about that. But once the crisis is over, do you think Australians will be prepared to subsidise because that's what we're talking, isn’t it? Subsidise these manufacturing based to be onshore.

Karen Andrews: I prefer to look at it as a recognition that they need to ensure their supply and what about …

Fran Kelly: [Interrupts] Well you can use the word recognition. But do we mean subsidy when we're talking recognition? Do we mean government subsidy of some degree?

Karen Andrews: I'm not talking about government subsidies at all. And interestingly, when I met with all of the manufacturing representatives during the last year, they weren't talking about subsidies either. They were talking about how we could strengthen our manufacturing capacity here …

Fran Kelly: [Interrupts] And how we do that?

Karen Andrews: By looking at where our key markets are; where we can value add - things such as battery development. We've got the critical minerals here. Let's look at the value add. So let's not just continue to dig things up out of the ground, stick them on a ship and send them overseas. Let's value add to them here. Let's look at our advanced manufacturing capabilities here but in key areas. And I'm saying that that should be us looking at food and it should be us looking at defence and it should be us looking at things such as emerging industries like space.

Fran Kelly: It can't happen without some kind of government investment. If it's not subsidies, and you say it won't be subsidies, will it be more investment in R&D and certainly more investment in our universities and TAFEs you think, for instance? I mean we've had cuts to those areas in the last few budgets. Will we be reversing those cuts?

Karen Andrews: Well with TAFE, there's been a lot of money that's gone into the vocational education sector. And let's not …

Fran Kelly: [Interrupts] It's a mess. It's a mess. The TAFE- the higher education sector.

Karen Andrews: Well if we look at vocational education and training, it's clearly an area that needs a lot of work because it's considered to be a second rate option and people don't tend to look at their skills and the benefits that come out of vocational education and training. So a lot of work is being done to turn around that perspective and encourage people to look at the jobs that they would get if they follow a VET pathway. But yes, it does need some work and it actually needs the state and territories to come together with the Commonwealth and work their way through what some of those issues are. Now in my dealings with the states and territories on vocational education, there has been a strong willingness to deal with these issues because we understand we've got significant skills shortages that we have to start addressing. So that work needs to continue and we have to have the skilled workforce of the future.

Fran Kelly: Do you think our trade policies are going to change? Because I noticed that Andrew Liveris, who's the former Dow Chemicals boss and heads up the Prime Minister's new manufacturing taskforce, has said quote: we drank the free trade juice and decided that offshoring was okay. He says that era is gone. Do you agree with that?

Karen Andrews: I don't think it's- I don't think it's gone and there's not going to be substantial changes to the way we do trade simply because trade is important to us. We are a trading nation and quite frankly, we can't produce everything that we want here …

Fran Kelly: [Interrupts] Are we still a free trading nation after this?

Karen Andrews: I think we will still be a free trading nation. But we're going to have to look at what we need to do to make sure that in a time of a crisis we are able to support ourselves.

Fran Kelly: There's resistance within Coalition ranks to this kind of talk too. Tim Wilson, for instance, an MP from Melbourne is warning against using the taxpayer to quote: underwrite options for domestic production which could quickly lead to good money being needlessly wasted. What do you say to that?

Karen Andrews: Well look, I understand what Tim's point of view is but my position is very clear and that’s that we need to be looking at growing the manufacturing sector here in Australia and making sure that we can meet our critical needs here or that we lock in some strong supply chains to be able to support that manufacturing here in Australia.

Fran Kelly: Minister, thank you very much for joining us.

Karen Andrews: It’s a pleasure.

Fran Kelly: Karen Andrews is the Minister for Industry, Science and Technology.