Interview with Afternoon Briefing, ABC
2 October 2020
Subject: Modern Manufacturing Strategy
Jane Norman: The COVID-19 crisis has exposed the fragility of global supply chains. You only need to think back to the beginning of the pandemic when supplies of personal protective equipment were at such risk that Australian factories swung into gear and started producing it themselves. Well, the Federal Government is committing $1.5 billion to revitalise the local manufacturing industry, and it’ll invest most of that money in six sectors, ranging from food to medicine, where Australia’s deemed to have a competitive advantage.
I'm joined now in the studio by the Industry Minister Karen Andrews. Thanks for your time today.
Karen Andrews: It’s a pleasure.
Jane Norman: Well, the government’s clearly banking on a pretty big resurgence here because if you look at the state of manufacturing right now, jobs were down nearly seven per cent over the past five years, the sector itself only contributes six per cent to GDP. Is $1.5 billion going to be enough?
Karen Andrews: Well, what you’ve got to look at with this strategy is that it builds on a very solid foundation now, which has already had significant funding injected into it, so skills and training, which is going to support all businesses, quite frankly. Also, we are doing work on industrial relations, we’re looking at energy to make sure it is sustainable and affordable, we're looking at international trade options. That work is already under way and that’s the base on which we have actually built the manufacturing strategy. So, we shouldn’t be looking at the manufacturing strategy in isolation, it actually has that very solid base, and it is a significant amount of money, $1.5 billion, but this is to partner with industry as well. And that's a key part of it. We know we need to build scale, we need our small businesses to become medium enterprises, our medium enterprises to grow to larger businesses, so scale is a key part of it. We want to make sure that our businesses are competitive, and resilience, which you mentioned particularly in relation to COVID, is an important part for this as well.
Jane Norman: One of the sectors you are focusing on with this $1.5 billion, 1.3 in grants spending, is the food and beverage industry. With this funding, what is it you are hoping will be made in that sector in Australia in, say, two or three years’ time?
Karen Andrews: Well, much of that work is only going to be led by industry so they have to be at the front of this. We’re going to work with industry but we’re looking to industry to work with us to develop the roadmaps that are going to make it very clear how the sector can develop, what the key opportunities are. Having said that, about 25 per cent of Australia's manufacturing is food related. We already know that there are significant markets for our meat and livestock, so we'll be looking at what we can do with processed and packaged meats, but we also have a very strong ag sector more broadly with our cropping, and many of our neighbours are looking at vegetable-based processed food product. So, those are the two key opportunities here for us. But we want to make sure that we’re accessing a market that is really keen to buy Australian products because they are considered to be clean, they are considered to be high quality, and food is a perfect opportunity.
Jane Norman: Part of the funding today is $107 million to identify supply chain vulnerabilities. Now, I think during the COVID-19 crisis economic sovereignty became the new black, everybody was talking about it. Can you take us through this part of the announcement, what this $100 million is actually going to do?
Karen Andrews: The first part of that is to continue doing the capability work so that we can understand where there are gaps in our supply chains. Now clearly that work has been ongoing because we started to identify issues when the COVID crisis first hit. One of the first things identified was that we only had one manufacturer of surgical masks here in Australia, so we did step in, we supported that business and now there are four or five surgical mask manufacturers here in Australia. So, we are going to look at what the gaps are in our supply chain, then we're going to work through the options as to how we're going to effectively fill those gaps, whether we look at supporting manufacturers to start up here in Australia, or to be ready so that they can pivot their manufacturing to produce masks or gloves or whatever it is that we need them to do. But we will also be working very closely with like-minded nations so that we can set up supply chains that we can rely on during a crisis, but we also want to make sure that we’re going to be able to feed into other global supply chains. So, with our like-minded partners, we will be looking at what goods we can supply to them.
Jane Norman: Are you talking sort of like an extension of the Five Eyes intelligence sharing network, that we’re going to look at like-minded countries like the UK, New Zealand, the United States, Canada? Is that what you’re sort of talking about here?
Karen Andrews: Look, potentially. We are looking at how we can secure our supply chains, so yes, we will look at like-minded nations, that would be an obvious thing for us to be doing. But we are focusing very much firstly here in Australia, what is our capability going to be. We are unlikely to ever be manufacturing every single product that we need and have all of the raw materials to make all of those products, so we have to make sure that we have got secure supply chains.
Jane Norman: So, with these four factories now that are manufacturing facemasks, say in a year’s time, fingers crossed, we have a vaccine for COVID-19 and the demand for PPE falls dramatically, how’s the Government going to keep that- those skills there? Would you consider nationalising companies? What are you considering?
Karen Andrews: Look, that's not what we're proposing at all, so, won’t be nationalising any parts of an industry, we won’t be subsidising. But what we are going to look at is the capability and the capacity to pivot. Now, during the crisis one of the key issues was making sure that we had sufficient invasive ventilators so that we could incubate people effectively. And we had some capability for that in Australia but there were many manufacturers who had never manufactured a ventilator before, who stepped up and said yes, we can do this, and they started building their own prototypes. So, this is what we want to do, we want to identify how we can pivot some of that manufacturing to produce goods in a time of need. Now, surgical facemasks is clearly quite difficult because of the volume that you need of those. So, states and territories quite frankly buy many more facemasks than what the Federal Government does as well, so they have an opportunity to support Australian manufacturers as well and make sure that they are ensuring that they can get goods that are made in Australia.
Jane Norman: We're talking a lot about how much the Government is going to be spending in manufacturing but there is currently a bill before the Parliament right now which would cut about $1.8 billion in research and development tax incentives. Given this pivot, this refocus on manufacturing, will you shelve that bill?
Karen Andrews: Research and development is absolutely crucial and there is an incredible focus on the R&D tax incentive because that does provide a significant benefit to many businesses in their research and development. It isn’t the only part of research and development, there is a lot of R&D that falls outside of the tax incentive that is happening every single day in businesses. We are looking at what we can do to support that, and as we develop the manufacturing roadmaps and how we can start to implement that. But in terms of the R&D tax incentive, we were very clear and have been that we are not prepared to support business as usual activities, but there is a role for the R&D tax incentive and as you heard the Prime Minister say at the Press Club today when he was questioned about it, the budget is coming out on Tuesday of next week, so that’s the opportunity to discuss it in detail.
Jane Norman: [Interrupts] Yeah. Well, he was clearly very much leaving open the option of getting rid of that bill, keeping that funding in place. Do you support the bill? It’s a government piece of legislation, do you support it in its current form?
Karen Andrew: I absolutely support research and development in this country and I support there being a tax incentive for that to happen. Now, we have heard-
Jane Norman: [Talks over] Do you support there being a $1.8 billion cut to that tax incentive?
Karen Andrews: I don’t think you should couch it quite frankly, in those terms.
Jane Norman: [Talks over] But isn’t that the consequence of the bill?
Karen Andrews: There is a lot of work that has been done on the R&D tax incentive to make sure that it is fit for purpose, so that was some of the work that we did. But we have listened to industry. And I know that you would like an answer now but you are actually going to have to wait until Tuesday. But I will be very supportive of industry. I want research and development to happen, I want to make sure that that research is translated, and we’ve got a big gap there because a lot of research is undertaken, but it is not actually turned into either a manufactured good or a service, and that is where we need to get much better.
Jane Norman: Okay. Before the pandemic there were about 850,000 Australians working in the manufacturing sector, as I mentioned at the start, that has been falling over the years. Do you know how many of those jobs were wiped out during the pandemic? How many of them still exist?
Karen Andrews: Look, there will be some more statistics coming through. But I mean- I think we’ve got to put this in the perspective that there have been job losses through COVID across the nation, across a whole range of industry sectors, and that's why it's so important that we have this manufacturing strategy in place because it gives some very clear directions about what the road to recovery is going to look like. And as I said before, it builds on the strong base that we are doing, that we’ll support all of industry as well. So, that is actually very important. So, we can talk about job losses, and every single job loss is something that no-one wants to happen at all, but what we as a government need to do is make sure that we are leading that recovery and demonstrating that there are opportunities for there to be growth in the economy and for there to be jobs, and manufacturing is absolutely one of the best ways that we can do that.
Jane Norman: Alright, Karen Andrews, thank you very much for your time.
Karen Andrews: Pleasure.