Chapter 1 - Introduction

  1. Introduction
    1. This inquiry was held as Australia stood at a generational crossroads in its industrial and economic development. During the inquiry, the Committee heard from a broad range of industry participants on the opportunities and challenges that face Australian manufacturing.
    2. Many of the challenges are not new. The previous decade of industrial policy has seen sustained attention and expenditure on Australia’s challenges in research and development (R&D) and innovation performance.
    3. There is substantial consensus on the need to focus on those industrial sectors and high-value niches where Australia can compete effectively in export markets. There is agreement on core areas such as medical and pharmaceutical manufacturing, and the value chains for mineral, energy (especially renewable energy) and agricultural resources. This inquiry did not hear anyone advocate for a return to broad-based subsidies and trade protections in areas that do not make strategic sense (for example, the mass-manufacturing of cheap, high-volume consumer goods).
    4. The broader value proposition of domestic manufacturing is well established. As recapped in the 2022 Flinders University report Manufacturing Transformation: High Value Manufacturing for the 21st Century:

Manufacturing should be front and centre of any attempt to find new sources of growth for Australia, because of its high returns to our economy and society: as the most knowledge-intensive sector, it drives innovation and productivity growth, invests heavily in R&D, and has strong linkages to other sectors like agriculture, resources, and high-end services. Manufacturing is critical for innovation across the economy, as it is also for capturing complementary and interdependent high-end services, with so many of the former divisions between them becoming blurred.[1]

1.5Some manufacturing challenges are more recent. COVID-19 and geopolitical trade shocks showed the weaknesses in Australia’s decreased manufacturing base. There is now broad support for the goal of achieving sovereign capability in areas of production critical to the functioning of Australian society, and in cross-cutting enabling technologies and skill areas such as artificial intelligence (AI), cyber security and quantum computing.

1.6Australia requires a substantial industrial transformation to transition simultaneously to net zero and Industry 4.0. At the same time, the current pace of the global transition to net zero has created a time-limited opportunity for Australia to capture market share in lucrative renewable energy value chains, and to respond to the growing risk to the carbon-intensive sectors that have been the mainstays of Australian exports and revenue.[2]

1.7These pressures are also causing a global increase in economic nationalism. As a small, relatively isolated market, Australia has to compete for global capital flows with jurisdictions offering unprecedented industry incentives. This inquiry looks at how to leverage Australia’s limited public and private capital pools and network of trade and diplomatic relationships to fund our industrial transformation.

1.8Advanced manufacturing offers both technologies and ways of thinking to support this transformation. It is doubtful if Australia can successfully navigate the current transition without taking up advanced manufacturing’s advantages for efficiency, productivity, cost-competitiveness and resilience.

Defining advanced manufacturing

1.9There is no universal definition of advanced manufacturing. In its submission to the inquiry, the Australian Manufacturing Workers’ Union (AMWU) said:

… the term has multiple, sometimes contradictory definitions. In some instances, it appears to be used to describe the integration of internet enabled devices, real-time data sharing and other digital technologies into manufacturing processes. In other examples, it appears to relate to the product market or the commodity being produced.[3]

Sophisticated, high-tech processes

1.10According to one view, advanced manufacturing is ‘any manufacturing process that takes advantage of high-technology or knowledge-intensive inputs as an integral part of its manufacturing process.’[4]

1.11The government-sponsored Advanced Manufacturing Growth Centre (AMGC) has long argued that ‘Every single manufacturer in Australia has the potential to be advanced.’[5] The AMGC has advocated against sector-based definitions in favour of a more inclusive understanding of advanced manufacturing, based not on what is being made, but how—such as adopting sophisticated value chain thinking and production techniques, and drawing on advanced knowledge, advanced processes and advanced business models.

1.12This definition has had traction with governments. The Department of Industry, Science and Resources (DISR) described advanced manufacturing as ‘a horizontal capability that is applicable to multiple industries across the economy’[6], and the Tasmanian Government noted:

Advanced manufacturers operate across all the state’s manufacturing subsectors including food and beverage processing, smart technologies, forestry, maritime, mining equipment technology and services, renewable energy, transport equipment and the defence industry.[7]

Industry 4.0 technologies

1.13In its submission, the Commonwealth Scientific and Industrial Research Organisation (CSIRO) explained that:

Global manufacturing is moving from the microprocessor [that is, computer] age, also known as the 3rd Industrial Revolution, to the 4th Industrial Revolution… [which] features the deep integration of digital and information sciences technologies, for example industrial internet of things (IIoT), machine to machine connectivity, artificial intelligence with deep learning, digital twin simulation and intelligent autonomous robotics.[8]

1.14Process-focused definitions of advanced manufacturing often emphasise the adoption of such ‘Industry 4.0’ technologies. For example, the Manufacturing Excellence Forum (Sunshine Coast) Limited defined advanced manufacturing as ‘the application of technology, automation, and data to enhance productivity, efficiency, and quality in the manufacturing process.’[9] The submission by Swinburne University of Technology[10] noted a recent Forbes article identifying the top 10 trends in manufacturing internationally as the IIoT, 5G and ‘edge computing’[11], predictive maintenance, digital twins, extended reality and the metaverse, automation and ‘dark factories’[12], robots and ‘cobots’[13], 3D printing, Web3[14] and blockchain technology, and lastly smarter, more sustainable products.

High value-added or complex products

1.15Advanced manufacturing has also been described in terms of the level of value added to manufactured goods.

1.16One variation of this definition focuses on systems and processes for adding value along the entire manufacturing value chain.[15] Manufacturing is commonly seen as having seven stages: R&D, design, logistics, production, distribution, sales and services. The production stage has traditionally been the focus, but advanced manufacturing can put new emphasis on pre- and post-production, where potential for value-adding may be greatest.[16]

1.17A similar definition focuses on the value-added embedded in end products[17]—especially if these products are advanced, innovative or complex. This focus often emphasises the R&D intensity of advanced manufacturing products. For example, at a public hearing in Melbourne, CSIRO Director of Manufacturing Dr Marcus Zipper described the CSIRO’s advanced manufacturing work as:

… everything from developing advanced materials, new materials, novel materials and advanced processing technologies, to converting some of those to specialised devices and engineered systems. It is that whole value chain, up to prototyping and advanced processing technology. It is everything you could imagine: metals, ceramics, polymers, hybrid systems, composites.[18]

1.18Similarly, Engineers Australia noted that:

Heavy engineering generally has a much higher level of innovation and research and development. Therefore, low and declining investment is cause for alarm for those who wish to see Australia develop a more advanced manufacturing sector.[19]

Economic complexity

1.19In discussing the link between advanced manufacturing and ‘value-added’, it is useful to mention recent conversations about Australia’s declining ‘economic complexity’.

1.20‘Economic complexity’ is a popular metric developed by Harvard University economists and referred to by several inquiry participants. It ranks countries’ industrial sophistication levels based on the diversity of their export baskets and the overall complexity of their exported goods.

1.21Australia’s low—and falling—economic complexity compared with OECD (Organisation for Economic Co-operation and Development) peers is frequently raised in manufacturing discussions (addressed further in Chapter 2). The AMWU’s National Political Adviser, Dr Katie Hepworth, explained the link between advanced manufacturing and economic complexity:

… ‘advanced manufacturing’ … is not just the integration of internet enabled devices, it’s not just automation and it’s not just data technologies. These might all be present, but, for us, they are not what advanced manufacturing is. Instead, it is the movement that we see towards higher value-add manufacturing processes; that is, goods and processes that generate a large margin between the final price of goods and the inputs used to produce them. This creates higher revenues for business and the country and also higher wages for workers. One measure of the level of value-add in the economy is economic complexity, which measures an economy’s ability to integrate diverse sources of knowledge and apply them to the processes of product technology and service innovation.[20]

Committee comment

1.22The Committee notes that there are a range of definitions of advanced manufacturing. The Committee observes that process- and product-focused definitions of advanced manufacturing are complementary. Process and product sophistication are often linked. Advanced manufacturing processes—including the adoption of digital technologies—are realistically required to manufacture most complex, high value-added products at commercial scale and world-competitive prices.

1.23Process- and product-focused definitions express two important propositions:

  • Advanced processes can help uplift the existing manufacturing base, making it more cost-competitive, safe and adaptable. They can assist cost-competitive domestic manufacturing of a larger range of critical goods for the local economy, regardless of whether the goods themselves are complex or advanced.
  • Diversifying into more advanced products can open access to high-value niches in global export markets. It can also help improve Australia’s sovereign capability and resilience against external trade shocks, both via export diversification and through broader and deeper industrial know-how—which gives the ability to pivot production when new needs arise.
    1. These and other benefits of expanding advanced manufacturing in Australia are discussed further below.

Why advanced manufacturing matters

Industry policy consensus

1.25The Committee notes the considerable consensus on the importance of innovation and technology deployment in manufacturing, and how this has formed recent industry policy. This section highlights the main themes of recent industry policy in relation to advanced manufacturing.

1.26Australian policymakers have recognised the transformative potential of advanced manufacturing processes—particularly robotics and automation—to counter Australia’s higher local production costs. There is also a consensus on: the potential economic gains from shifting production into high value-added niches where Australia can compete on quality rather than price; which sectors Australia is best suited to compete in; and that fostering globally competitive industries at scale will result in more and better local manufacturing jobs.

1.27As noted above, supply chain disruptions during COVID-19 strengthened arguments for domestic manufacturing and highlighted the need for sovereign capability to deliver critical products and services. Another recent focus has been the value of growing sovereign capability in the energy supply chain, noting Australia’s current dependence on imports for both solar panels and wind turbines.[21] The efficiencies offered by advanced manufacturing can support sovereign capability in critical areas at a reasonable price premium, and so reduce or avoid prolonged reliance on market-distorting subsidies.

Innovating and focusing on strengths

1.28National industry policies from the 2010s reflect an understanding that Australian manufacturers need to be able to compete globally. In many sectors the local market is too small to support manufacturing at scale. Policies have sought to promote innovation and digital transformation to boost local manufacturers’ productivity and cost-competitiveness. This understanding has also informed a stable strategy of targeting government support at sectors where Australia can credibly compete—and win—on global markets.

1.29For example, A Plan for Australian Jobs (2013) included support for pharmaceutical, auto and food manufacturing, and for advanced manufacturing precincts in major cities.[22] The Industry Innovation and Competitiveness Agenda (2014) likewise featured targeted support for manufacturing sub-sectors with growth potential based on Australia’s comparative advantages, including food and beverage processing, pharmaceuticals, biotech and medical manufacturing.[23] The Agenda led to the establishment of Australian Government-sponsored ‘Industry Growth Centres’ in: food and agribusiness (FIAL); mining equipment, technology and services (METS Ignited); oil, gas and energy resources (NERA); medical technologies and pharmaceuticals (MTPConnect); and advanced manufacturing (the AMGC). Cyber security was later added (AustCyber).

1.30The National Innovation and Science Agenda (2015) built on the previous two federal industry policies, and rolled out many new measures aimed at incentivising innovative entrepreneurship and addressing Australia’s weak performance on OECD metrics of research commercialisation and business–research collaboration. It also increased funding for biomedical research translation (that is, commercialisation), cyber security and quantum computing.[24]

Securing sovereign capability

1.31Sovereign capability is the ability of a country to achieve its objectives in key areas such as safety, defence, health and wellbeing, food security, energy and infrastructure. COVID-19 showed the risks to the nation in not having strong sovereign capabilities in advanced manufacturing. Conversely, it also showed the value of developing such capabilities for Australia’s resilience to future trade shocks—whether due to another pandemic, natural disasters or geopolitical friction.

1.32Developed during and partially in response to the supply chain challenges of the COVID-19 pandemic, the Modern Manufacturing Strategy (2020) reiterated the policy of building scale in manufacturing sub-sectors of competitive strength—and added the goal of securing sovereign manufacturing capability in areas of national interest. The identified ‘National Manufacturing Priorities’ were food and beverage processing, resources technology and critical minerals processing, medical products, recycling and clean energy, defence, and space.[25]

1.33Additionally, under the Supply Chain Resilience Initiative and associated Sovereign Manufacturing Capability Plan, the Australian Government prioritised the domestic manufacturing of biopharmaceuticals and medicines, agricultural production chemicals (such as fertilisers), personal protective equipment, semiconductors, water treatment chemicals (such as chlorine) and telecommunications equipment.[26]

Re-shoring Australian manufacturing jobs

1.34Another advantage of advanced manufacturing is its ability to bring manufacturing jobs back to Australia. The automation of repetitive, simple tasks using robots and other digital technologies is likely to re-shore manufacturing jobs that have moved to jurisdictions with low wages and lax labour laws. As noted by the Australian Institute of Machine Learning in their submission to this inquiry:

Automation is … making the costs of manufacturing processes more competitive in high-income economies. Productivity increases achieved through technology and automation have led to net increases in economic activity, jobs growth and productivity. The 2020 US Robotics Roadmap shows that increased automation between 2010 – 2020 was accompanied by a net increase in manufacturing jobs. In fact, in the United States there is an active movement to leverage the benefits of automation to help rebalance labour costs and reshore manufacturing. The US Reshoring Initiative 1H 2022 report estimates that 1.6 million jobs have been brought back to the United States by reshoring and inward-bound foreign direct investment since 2010. While the leading factors driving this activity since the Covid-19 pandemic have been supply chain gaps and a growing need for greater self-sufficiency, automation-driven increases in domestic productivity have been among the leading factors every year since 2010. In Germany, manufacturers deploy three times more robots than US companies, but still employ more people. Relative to the size of its economy, the German manufacturing workforce is twice that of the United States.[27]

Collateral benefits

1.35There are a number of collateral benefits of high-efficiency, digitally enabled advanced manufacturing processes, including:

  • improved factory safety by automating dangerous, physically demanding and repetitive tasks
  • improved quality of product
  • the potential to attract and retain a more diverse manufacturing workforce at a time of labour shortages, including women, older people and less physically able people
  • greater energy efficiency and less waste through sophisticated process monitoring and optimisation, and so a lower environmental footprint.

Current strategies

1.36The National Reconstruction Fund (NRF) is the Australian Government’s current flagship industry policy. It is guided by the philosophy of leveraging natural and competitive strengths, improving resilience against supply chain vulnerabilities and promoting sovereign industry capability, as well as promoting innovation commercialisation.

1.37The priority manufacturing sub-sectors for the NRF are: renewables and low emissions technologies; medical science; transport; value-adding in the agriculture, forestry and fisheries sectors; value-adding in resources; defence capability; and enabling capabilities (such as AI, cyber security and quantum).[28]

1.38According to DISR, the $15 billion NRF ‘is one of the largest investments in Australia’s manufacturing capability’ in Australia’s history.[29] The NRF is discussed in more detail in Chapters 3, 4 and 6.

1.39Similarly, the submission by the Department of Defence foregrounds the recent announcement of the Australia, United Kingdom and United States (AUKUS) partnership as a major opportunity for the development of advanced manufacturing in Australia.[30] The inquiry heard from several witnesses that the delivery of a fleet of nuclear-powered submarines will catalyse a step change in our advanced naval manufacturing.

1.40State and territory governments have also released high-profile industry development policies, including many sector-specific strategies aligned with the national priorities (see Appendix C). Headline examples include:

  • Tasmania’s Advanced Manufacturing Action Plan 2024[31]and Advanced Manufacturing Workforce Development Plan and Industry Compact[32]
  • Victoria’s Innovation Statement[33] and Made in Victoria 2023: Manufacturing Statement[34]
  • South Australia’s Economic Statement[35] and Advanced Manufacturing Strategy[36]
  • Western Australia’s Innovation Strategy[37], Diversify WA: Supply Chain Development Plan[38] and WA Advanced Manufacturing Plan (in development)[39]
  • the Northern Territory’s Business Innovation Strategy[40]
  • Queensland’s New-Industry Development Strategy[41], Advanced Manufacturing 10-Year Roadmap and Action Plan[42], and Innovation for a Future Economy 2022–2032 Roadmap[43]
  • New South Wales’ Innovation Strategy[44] and Advanced Manufacturing Industry Development Strategy[45], and the creation of a Modern Manufacturing Commissioner and Modern Manufacturing Strategy (in development).[46]

Inquiry process

1.41The Committee issued a media release on 15 February 2023 announcing the inquiry and calling for submissions. Sixty-three submissions were received. A list of these submissions can be found in Appendix A.

1.42The Committee held five public hearings, and conducted four days of site visits in Sydney, Brisbane, Melbourne and Adelaide. Details of these meetings can be found in Appendix B, and transcripts for all public hearings can be found on the Committee’s website.[47]

Report outline

1.43This report has six chapters:

  • Chapter 1 introduces advanced manufacturing as a concept, outlines its place in Australian industry policy over the past decade, and gives a summary of its benefits.
  • Chapter 2 provides an overview of the Australian and international manufacturing landscape, including the advantages and disadvantages facing Australian manufacturers.
  • Chapter 3 discusses financial issues affecting the development of advanced manufacturing in Australia, and opportunities for governments to use financial levers to foster manufacturing.
  • Chapter 4 discusses ongoing challenges commercialising Australian R&D, including through greater collaboration between industry and the research sector. It particularly focuses on manufacturers’ experiences with policy interventions to date, and how governments might improve on these.
  • Chapter 5 talks about the need for a skilled, diverse manufacturing workforce and small business capability uplift.
  • Chapter 6 summarises insights into specific sectors and technologies at the focus of current government policy, with a view to informing the implementation of initiatives such as the NRF and sector-specific growth strategies.


1.44The Committee would like to thank all the submitters and witnesses to this inquiry, and their readiness to share their expertise with the Committee. The four days of site visits gave the Committee a unique insight into the reality of manufacturing in Australia. The Committee appreciates the time and effort that went into assisting the Committee with its inquiry.

1.45Throughout the inquiry the Committee heard from a broad range of stakeholders across various industries and the research sector, and from both cities and the regions. Generally, stakeholders had similar ideas about how advanced manufacturing in Australia can be developed. These ideas contributed to the development of the Committee’s recommendations, which it believes will help inform policymaking by the Australian Government—in partnership with the states and territories—in its support of advanced manufacturing in Australia.


[1]Australian Industrial Transformation Institute (Flinders University), Manufacturing Transformation: High Value Manufacturing for the 21st Century, February 2022, p. 9.

[2]Parliamentary Library, ‘Coal, gas and decarbonisation—challenges and policy choices’, Parliamentary Library Briefing Book: Key Issues for the 47th Parliament, June 2022, pages 91–99.

[3]Australian Manufacturing Workers’ Union (AMWU), Submission 17, p. 2.

[4]Australian Bureau of Statistics, Characteristics of Businesses in Selected Growth Sectors, Australia,, viewed 13 October 2023.

[5]Advanced Manufacturing Growth Centre (AMGC), Advanced Manufacturing: A New Definition for a New Era, October 2017, p. 4.

[6]Department of Industry Science and Resources (DISR), Submission 59, p. 1.

[7]Tasmanian Government, Submission 45, p. 2.

[8]Commonwealth Scientific and Industrial Research Organisation (CSIRO), Submission 23, p. 6.

[9]Manufacturing Excellence Forum (Sunshine Coast) Limited, Submission 2, p. 2.

[10]Swinburne University of Technology, Submission 56, p. 4.

[11]In which ‘data is processed and analyzed closer to the point where it’s created’ by factory sensors, rather than being transmitted to centralised data centres or the cloud for processing. ‘Because data does not traverse over a network to a cloud or data center to be processed, latency is significantly reduced’—IBM, What is edge computing,, viewed 13 October 2023.

[12]Fully automated factories requiring no human labour. Also called ‘lights-out’ factories.

[13]Collaborative robots, designed to cooperate with human workers, not replace them.

[14]‘Web3 is often described as a series of open-source and interconnected decentralized applications powered by blockchain computing architecture’—S Ehrlich, ‘What is Web3?’, Forbes, 10 March 2023,, viewed 13 October 2023.

[15]AMGC, Manufacturing Competitiveness Plan, April 2022, p. 8; DISR, Submission 59, p. 1.

[16]See the ‘smile diagram’ in DISR, Submission 59, p. 2.

[17]These may be final goods or (more commonly) intermediate goods for input into global value chains.

[18]Dr Marcus Zipper, Director, Manufacturing, CSIRO, Committee Hansard, West Melbourne, 3 May 2023, pages 16–17.

[19]Engineers Australia, Submission 16, p. 3.

[20]Dr Katie Hepworth, National Political Advisor, AMWU, Committee Hansard, Sydney, 5 July 2023, p. 22; AMWU, Submission 17, p. 2, 6.

[21]Sun Cable, Submission 43, pages 7–8; Smart Energy Council, Submission 48, p. 13; T de Atholia, G Flannigan and S Lai, ‘Renewable Energy Investment in Australia’, Reserve Bank of Australia Bulletin, March 2020, pages 36–46.

[22]Department of Industry, Innovation, Science, Research and Tertiary Education, A Plan for Australian Jobs: The Australian Government’s Industry and Innovation Statement, February 2013.

[23]Department of the Prime Minister and Cabinet, Industry Innovation and Competitiveness Agenda: An Action Plan for a Stronger Australia, October 2014.

[24]Department of Industry, Innovation and Science, National Innovation and Science Agenda: Welcome to the Ideas Boom, December 2015.

[25]Department of Industry, Science, Energy and Resources, Make It Happen: The Australian Government’s Modern Manufacturing Strategy, October 2020.

[26]Hon Christian Porter MP, Minister for Industry, Science and Technology, ‘Securing Australia’s Supply Chain Resilience for Critical Products’, Media Release, 30 June 2021; Department of Industry, Science, Energy and Resources, Sovereign Manufacturing Capability Plan: Tranche 1, July 2021; Department of Industry, Science, Energy and Resources, Sovereign Manufacturing Capability Plan: Tranche 2, December 2021.

[27]Australian Institute of Machine Learning, Submission 21, pages 2–3.

[28]DISR, ‘National Reconstruction Fund: diversifying and transforming Australia’s industry and economy’, Media Release, 27 October 2022; Hon Ed Husic MP, Minister for Industry and Science, ‘National Press Club address: Building the economy for the future’, Media Release, 29 November 2022.

[29]DISR, Submission 59, p. 6.

[30]Department of Defence, Submission 58, p. 1.

[31]Department of State Growth (Tasmania), Tasmanian Advanced Manufacturing Action Plan 2024, November 2020; Tasmanian Government, Submission 46, p. 2.

[32]Hon Felix Ellis MP, Minister for Skills, Training and Workforce Growth (Tasmania) and Hon Madeleine Ogilvie MP, Minister for Advanced Manufacturing and Defence Industries (Tasmania), ‘Partnership for a strong advanced manufacturing workforce’, Media Release, 23 September 2023.

[33]Hon Jaala Pulford MLC, Minister for Employment, Minister for Innovation, Medical Research and the Digital Economy, Minister for Small Business and Minister for Resources (Victoria), ‘New innovation plan making a bold statement’, Media Release, 29 November 2021.

[34]Department of Jobs, Skills, Industry and Regions (Victoria), Made in Victoria 2030: Manufacturing Statement, October 2022.

[35]Government of South Australia, South Australian Economic Statement: Smart. Sustainable. Inclusive, April 2023.

[36]Government of South Australia, South Australia’s Advanced Manufacturing Strategy, October 2023.

[37]Department of Jobs, Tourism, Science and Innovation (Western Australia), Innovation Strategy: Western Australia – The Place to Innovate, December 2022.

[38]Government of Western Australia, Diversify WA: Supply Chain Development Plan2021–22, October 2021.

[39]Government of Western Australia, Submission 51, p. 2.

[40]Department of Industry, Tourism and Trade (Northern Territory), InnovationTerritory: 2022–23 Territory Business Innovation Strategy 2.0, March 2022.

[41]Department of State Development, Infrastructure, Local Government and Planning (Queensland), Queensland New-Industry Development Strategy: A Strategy for New Industry in a Decarbonising Global Economy, May 2023.

[42]Department of Regional Development, Manufacturing and Water (Queensland), Queensland Advanced Manufacturing: 10-Year Roadmap and Action Plan, Edition 3, October 2022.

[43]Advance Queensland and Department of Tourism, Innovation and Sport (Queensland), Innovation for a Future Economy: 2022–2032 Roadmap, July 2022.

[44]Government of New South Wales (NSW), Bringing Big Ideas to Life: NSW Innovation Strategy, November 2016.

[45]Department of Industry (NSW), NSW Advanced Manufacturing Industry Development Strategy, May 2018.

[46]Investment NSW, Modern Manufacturing in NSW,, viewed 10 October 2023.

[47]House Standing Committee on Industry, Science and Resources, Developing Advanced Manufacturing in Australia: Public Hearings,, viewed 13 October 2023.