Australia turns to idled factories to pull it out of COVID-19 slump
07 September, 2020
In 2017, the last car Australia built rolled out of a General Motors' plant in the city of Adelaide, ending seven decades of local automotive history and the fact that the country's factories could ever compete globally.
3 years later, policymakers are once more looking to manufacturing to create some growth because they scramble to drive the economy through the coronavirus and out of its deepest slump on record.
While Australians are unlikely to get an incredible number of locally made cars, refrigerators and toasters because they did in the 20th century, a government push that puts manufacturing at the centre of its longer-term recovery plan has strong industry support and has kindled ventures that could have seemed far-fetched half a year earlier.
Behind the pivot is a realisation that Australia has been too reliant on Asia for the way to obtain essential goods. A recently available worsening in relations with China, Australia's biggest trading partner, has only strengthened that view.
"If you look at it over time, we've been running down our manufacturing and we're at this time of inflexion - we're saying maybe we shouldn't be doing that," said Drew Woodhouse, a Sydney-based consultant at Bain & Company who talks about supply chain issues.
For many, the coronavirus has shown that the benefits of globalisation, namely low tariffs and cheap labour, are limited when the world economy grinds to a halt.
Which has prompted many in the market to earnestly consider bringing procedures onshore, even if this means some costs go up.
What businesses say is needed longer-term are reforms that reduce energy costs, motivate innovation and cut red tape for investment.
Andrew Liveris, former head of US professional giant Dow Chemicals, returned to his native Australia earlier this season to become listed on Prime Minister Scott Morrison's manufacturing advisory task force.
"We have a whole lot of confusion about how precisely to get investment approved here," Liveris told Reuters. "So we must adopt a business-friendly environment to attract foreign direct investment to an economy that can punch above its weight regarding quality research and quality technologies."
(RE)START YOUR ENGINES
Scarred by critical shortages during World War II, Australia expanded its factory sector in following years, heavily protected by tariffs.
By the finish of the century, however, production had largely drifted offshore as businesses and politicians embraced globalisation's upsides.
In 2019, manufacturing accounted for just 5 % of gross domestic product, down from about 25 % in 1960, while its share of the labour force has fallen to 7 % from 17 % in 1984.
Liveris said manufacturing should make up closer to 15 % to 20 % of GDP.
Although some economists see that as an ambitious target, the shift in thinking has galvanised some early movers.
H2X, a startup formed in-may, is looking to resurrect local automobile production by making hydrogen cars in Port Kembla, a smelting town about 100km south of Sydney.
Brendan Norman, the company's leader who previously done hydrogen cars in China, expects a prototype to prepare yourself later this season and production to start out in 2022. The procedure is seeking to employ 100 persons by the end of the year, which could ramp up to 5,000 by 2025.
Norman said production could use 80 % local content by 2024. That wager is founded on a belief that Australia already has the majority of the skills and materials had a need to make items such as for example supercapacitors and fuel cells, regardless if the manufacturing scale is not there yet.
"Australia can simply compete in this since it is high-tech manufacturing and this is a thing that we feel we should be able to inspire to come back," he said.
"If we're producing the majority of the world's hydrogen, Let me think that we are able to produce the various tools that must make make use of it properly."
SCOPE FOR REFORM
H2X's plan relies less on low labour costs that offshore production provides and more on the worthiness of intellectual property, like Germany's high-tech factory sector.
Visy Industries, a recycling and packaging company, expanded into glass manufacturing in a deal worth almost AS$1 billion (US$730.80 million).
That move comes as China's recent curbs on waste imports forces Australia to create innovative ways of coping with its garbage.
Among the central proposals of the manufacturing task force is to lower energy costs by boosting distribution.
Australian companies are paying about 50 per cent more for gas than its export customers, the country's competition watchdog said.
Treasurer Josh Frydenberg said the other day that policies that foster entrepreneurship and cut red tape will be type in next month's national budget.
Tony Shepherd, former chairman of infrastructure firm Transfield Services, said Australia needed to use the crisis to raised streamline investment policies over the multiple layers of government.
"We couldn't even produce the essential medical supplies and we were concerned about toilet paper," he said, discussing the panic buying of toilet tissue earlier this year. "If that's not enough of a wake-you-up call for politicians to get going, I don't know very well what is."
Source: www.channelnewsasia.com
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