Budget Review 2020–21 Index
The share of total employment attributable to manufacturing
has been declining for a number of years, falling from a peak of 1.3 million
(more than 25 per cent of total employment) in 1966–67. Australian Bureau of
Statistics (ABS) data show that employment
in the manufacturing sector declined from 916,000 (8.0 per cent of
total employment) to 862,200 (6.9 per cent of total employment) between
August 2013 and August 2020, while services sector employment increased from 8.9
million (78.1 per cent of total employment) to nearly 10.0 million (79.3 per cent
of total employment) over the same period.
On the other hand, the COVID-19 pandemic has hit employment
in the services sector particularly hard. ABS
data show that, over the year to August 2020, manufacturing sector employment
fell by 1.3 per cent or 11,600 workers, but employment in accommodation
and food services fell by 15.5 per cent (141,700 workers) and
employment in arts and recreation services fell by 14.6 per cent (36,300
Survey of Business Impacts of COVID-19 reported in April 2020 that 82 per cent
of manufacturing businesses anticipated adverse effects (over the next two months)
relating to a reduced demand for goods, 59 per cent expected adverse
effects arising from supply chain uncertainty, and 65 per cent
anticipated adverse effects relating to uncertain financial markets.
Following the impact of the COVID-19 pandemic on global
value chains, governments are increasingly intervening to promote domestic
manufacturing (see, for example, Eurofund,
Boston Consulting Group, the
World Bank and the
Economist). The World Economic Forum identified five key
imperatives to ensure the long-term success of manufacturing and supply
- rapid tailoring of manufacturing and supply systems to changing
agile manufacturing and supply system set-ups enabled by advanced
- logistics coordination across and within global value chains
- adoption of new ways of working and governing to increase
manufacturing resilience and
shared responsibility and collaboration among companies and
authorities to address social and environmental challenges.
COVID-19 Coordination Commission (NCCC) Manufacturing Taskforce (the
Taskforce) pointed to a drop in domestic demand, an
increase in the number of unemployed (by nearly 29 per cent over
the year to August 2020), supply chain uncertainty, decreased demand for Australian
exports, rising trade protectionism, stalling international labour flows and
growing digitisation as background to its interim report findings.
Interim Report (NCCC Interim Report) called for a longer term focus
on creating value from investments, the rigorous implementation and measurement
of impact, and support with structural reforms, starting with worker skills.
The Taskforce estimated that its proposed reforms could improve the resilience
of the Australian economy through diversification and lead to more than 170,000
‘well-paid direct jobs in energy-enabled industries’ if manufacturing industry
grew by 10–20 per cent.
The Government’s Modern
In a speech
to the National Press Club (NPC) announcing the Modern
Manufacturing Strategy, (MMS) the Prime Minister stated:
The objective is to build scale and capture income in
high-value areas of manufacturing where Australia either has established
competitive strength or emerging priorities.
The Government will provide around
$1.5 billion over five years from 2020–21 to support the MMS, focusing
on six national manufacturing priority areas with a perceived advantage or
strategic priority: resources technology and critical minerals processing; food
and beverages; medical products; recycling and clean energy; defence; and
space. These sectors largely reflect those identified as ‘areas of competitive
advantage’ in the May 2020 NCCC Interim Report. Table 1 shows planned
expenditure over the next four years.
Table 1: Modern Manufacturing
Source: Australian Government, Budget measures: budget paper no. 2: 2020–21, p. 120.
Funding is allocated as follows:
- $1.3 billion over five years from 2020–21 to establish the Modern
Manufacturing Initiative, which will provide co-funding for large manufacturing
projects that have broad sectoral benefits across the National Manufacturing
Priorities. According to the Prime Minister’s NPC
address, the focus will be on:
long-term business collaboration of around $80 million per project to
foster large-scale production or research and development facilities involving
consortia of businesses (expressions of interest from late in the first half of
projects translating research into commercial outcomes with investments of
around $4.0 million on average and
of around $4.0 million to help manufacturers integrate into local and
international supply chains and markets (applications opening in first half of
- $107.2 million over four years from 2020–21 to identify
and address critical vulnerabilities in domestic and international supply chains
by providing manufacturers with support through the Supply
Chain Resilience Initiative (support available from 1 July 2021). In
address, the Prime Minister announced this initiative as a means to ‘guard
against supply chain vulnerability for critical necessities and to secure us
against future shocks’
- $52.8 million over three years from 2020–21 for Round 2
of the Manufacturing
Modernisation Fund, which offers grants of $100,000 to $1.0 million to
help businesses take on new employees and upskill workers, and co-funding for
capital investment technology upgrades (open before the end of 2020)
- $30.0 million over two years from 2020–21 for the Advanced Manufacturing Growth Centre (AMGC)—one
of six government-funded Growth
Centres—the purpose of which is to ‘transform Australian Manufacturing to
be more globally competitive and generate the demand for jobs’ and
- $20.0 million in 2021–22 to industry Growth
Centres, including the AMGC, Food Innovation Australia, METS Ignited and
The MMS is part of the five-year $74.0 billion JobMaker
Plan and is one of a number of measures—including the Research
and Development Tax Incentive, a research package,
in new energy technologies and a Digital
Business Plan—designed to ‘support businesses to create jobs’.
Many of these proposed measures reflect concerns raised by
the manufacturing sector. For example:
- in its submission to the Senate
Select Committee on COVID-19, the South East Melbourne Manufacturers
Alliance called for government support for research and development investment
by manufacturers, ‘effective models for industry-university collaboration to
take innovation through to commercialization with production retained in
Australia’, a clear energy policy, and incentives for businesses to invest in
advanced manufacturing technologies, ‘recognizing that most manufacturing
employees in Australia are employed in SMEs’ and
in the face of widespread disruption to world trade resulting
from the COVID-19 pandemic, the Export Council of Australia called for a ‘clear
geographic mapping’ of Global Supply Chains to see the linkages and understand where
there are weaknesses (in a submission to the Joint Standing Committee on
Foreign Affairs, Defence and Trade’s, inquiry
into the implications of the COVID-19 pandemic for Australia’s foreign affairs,
defence and trade).
Other manufacturing industry
In other manufacturing industry support, the Government has
committed to provide:
- $15.0 million in 2020–21 to support an upgrade of steel
processing and galvanising capability in Whyalla, South Australia and
- $5.0 million in 2020–21 to establish an advanced manufacturing
facility in South Australia to facilitate the manufacturing and assembly of
electric vehicles, and for a bi-directional vehicle-to-grid trial in South
In August 2020, the Government announced a $1.0 billion
investment package to boost Australia’s defence industry. Initiatives
included ‘accelerating important ADF capability development projects, targeting
key manufacturing, construction and high-tech sectors.’
In September 2020, the Government announced
a simplification of the Export Market Development Grant program, from a
scheme providing assistance (to small and medium sized businesses) through
reimbursement after expenditure, to an upfront grant agreement.
. Productivity Commission, Trends in
Australian Manufacturing, Commission Research Paper, 2003. Employment
in manufacturing temporarily accounted for 33 per cent of all employed persons
in the mid-1940s, reflecting the war time manufacturing boom.
. The Growth
Centres (AMGC, AustCyber, Food Innovation Australia Ltd (food and
agribusiness), MTPConnect (medical technologies and pharmaceuticals), METS
Ignited (mining equipment, technology and services) and National Energy
Resources Australia (oil, gas and energy) are not-for-profit organisations,
led by boards of industry experts. Each has its own Sector Competitiveness Plan
describing a ten-year strategy, identified regulatory reform opportunities and
industry knowledge priorities such as skills and research requirements.
All online articles accessed October 2020
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