Investing in a Future Made in Australia: What it means for Australian manufacturers

Investing in a Future Made in Australia: What it means for Australian manufacturers

In the post-COVID era, the need to diversify supply chains and reduce Australia’s reliance on offshore manufacturers, particularly those located in China, has been a hot topic.

Specifically, much has been made of the need to reshore manufacturing to mitigate supply chain risks for Australian companies, and to arrest the decline of Australian manufacturing – the sector has been shrinking rapidly since 2008, and real output has contracted every single quarter since September 2011.

Until recently however, it seemed as though the private sector would be left to its own devices to take these steps. Not surprising really when you consider that for the last quarter-century Australia has pursued a political agenda that prioritises free trade over protecting domestic industries. By the way, I’m not saying I think the agenda is entirely wrong, just that I believe you can have your cake and eat it too.

So it was with interest that I noted that the Federal Government’s ‘A Future Made in Australia’ plan – aimed at invigorating the manufacturing sector – was a centrepiece of the 2024-2025 Budget.

The plan provides a number of benefits and incentives to Australian manufacturers:

1. Investment in Renewable Energy and Net Zero Transition

The budget allocates $65 billion to renewable energy initiatives, including a $1.7 billion Future Made in Australia Innovation Fund and $6.7 billion for hydrogen production incentives. This should position manufacturers to capitalise on cleaner, more affordable energy and pioneering green technologies. It should also spur the growth of related manufacturing sectors, such as the production of solar panels (originally invented in Australia, but currently manufactured primarily in China), wind turbines, and battery storage systems. Australian manufacturers that can produce or adapt their product lines to meet these sectors stand to benefit.

2. Support for Critical Minerals and Resources

With $8.8 billion earmarked for critical minerals, the budget also promotes the processing and refining of these essential resources. This includes significant investments in strategic projects, mapping, and supply chain enhancements, fostering growth in high-demand sectors like batteries and electronics.

One specific measure proposed is a Critical Minerals Production Tax Incentive, which will provide a production incentive valued at 10% of relevant processing and refining costs for Australia’s 31 critical minerals. This incentive will be applicable for up to 10 years per project, for production between 2027-2028 and 2039-2040 by projects that reach final investment decisions by 2030.

This makes sense to me insofar as Australia’s ‘dig and ship’ obsession has seen us dig stuff out of the ground and send it offshore without value-adding for at least the last 15 years. While the number of mining industry jobs has doubled since 2006, one in four manufacturing jobs has disappeared over the same period. And although offshore processing might be cheaper, we still need to buy back the finished products. The gritty reality is that a significant proportion of those purchases are made from China, a country that has gone from being one of our closest trading partners five years ago to one that is viewed with a degree of caution by both businesspeople and government today.

If we can get the policy setting right, why can’t we mine and manufacture and export value-added products rather than just raw materials?

3. Manufacturing Clean Energy Technologies

A $1.5 billion commitment to clean energy technology manufacturing, including $1 billion for solar and $523.2 million for battery innovations, encourages manufacturers to develop and scale new technologies, enhancing Australia’s competitive edge in the global market. Again, at first glance, this policy makes sense. If we believe that new opportunities in clean energy industries are emerging and will play a substantial role in shaping the global economy, then we should capitalise on Australia’s natural resources and skilled workforce to ensure that it becomes an indispensable part of this net zero global economy.

4. Digital and Technological Advancements

The budget dedicates $466.4 million to build a commercial-scale quantum computer and $288.1 million to support the Digital ID System and robotics strategy. These investments enable manufacturers to adopt cutting-edge technologies, streamline operations, and boost productivity. In my view, anything that we can do to accelerate our use of robotics and reduce the cost of Australian manufacturing is a plus. This is one of the important ways in which we will be able to compete in the global manufacturing space going forward.

5. Skills and Training for Future Industries

Over $500 million is allocated for skills and training in priority industries. This includes expanding eligibility for new energy apprenticeships and investing in clean energy training facilities, ensuring a skilled workforce ready to meet Australia’s future manufacturing demands. If these measures can boost the productivity of Australia’s workforce, I’m all for it, although given that our productivity growth has slumped to the lowest level in 60 years, this is a project that will require giant amounts of focus, consistency and cultural change, alongside the financial investment.

6. Streamlining Approvals and Encouraging Investment

Thankfully, the Government recognises that private sector investment will be critical to its plan. $134.2 million is set aside to expedite approvals for significant renewable energy projects and enhance scrutiny of foreign investments, and the Government proposes to reform its investment settings and regulatory processes to attract the investment Australia needs. For example, a new front door will provide a single point of contact for investors and companies with major investment proposals, will support accelerated and coordinated approval decisions, and will connect investors with the government’s specialist investment vehicles.With any luck, these measures reduce bureaucratic delays and foster a more conducive environment for manufacturing investments.

7. Strengthening Supply Chains

An additional $14.3 million investment aims to develop a National Renewable Energy Supply Chain Action Plan and engage with trade partners to ensure robust and fair supply chains for critical materials, essential for manufacturing stability and growth.

8. Support for Small Businesses

Last but not least, the budget offers $641.4 million in targeted support for small businesses, including energy bill relief and extended asset write-offs, measures which will help small manufacturers manage costs and invest in growth opportunities.

So there you have it. The 2024-25 budget appears to provide some encouraging initiatives to support the manufacturing sector through significant investments in renewable energy, critical minerals, technological advancements, and workforce development. By fostering innovation and reducing operational hurdles, it aims to secure Australia’s place as a leader in global manufacturing. Can it follow through and turn these initial steps into reality? I’d love to know what you think.

Looking to expand your manufacturing business internationally? I help manufacturing founders increase their strategy, momentum and cashflow in international markets. Check out or connect with me to find out more!

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