Australian manufacturing has been disregarded for several decades in preference to the globalisation of supply chains. COVID-19 has triggered a policy re-think and placed local manufacturing back on the agenda. Multiple organisations together with government agencies are now working on the pathway to best rebuild Australian advanced manufacturing capability.
Australia’s successful handling of COVID-19 has presented a unique opportunity to re-build and enhance advanced manufacturing, incorporating the unique Aussie characteristics of the invention, best practices and capability.
There are five major manufacturing countries in the world, that is, China, the USA, Germany, Japan and South Korea. Although Australia is not able to compete in the manufacturing environment today, the number of R&D activities in Australia cannot be ignored. Australia has comprehensive research and development (R&D) initiatives active through four specific disciplines — science, technology, engineering and mathematics (STEM) — in an interdisciplinary and applied approach and in commercial business.
The government has R&D Tax Incentives (RDTI) that support the manufacturing sector. According to The Hon. Karen Andrews MP, as well as the federal government's $1.5 bn manufacturing spending package, there is “almost $7 bn of funding injected into the skills sector” using RDTI. As announced in the 2020-21 Budget, the government is providing $5.8m to scope a University Research Commercialisation Scheme to ensure improved commercialisation of university research. This is in addition to the $1.2 bn provided to the university research sector to enhance the capability and excellence of Australian research.
Achieving commercialisation of intellectual property within the advanced manufacturing sector can be challenging. There are excellent examples in the USA and Israel that Australia can learn from. Israel has well-developed advanced R&D hubs that cooperate with industry. At the 11th Australian Space Forum, it was demonstrated that most universities in Australia have established commercialisation hubs that access a range of R&D incentives.
Industries can use these entrepreneurial hubs to provide innovative solutions that give them significant advantages and keep them at the cutting edge in a fast-changing, competitive world. Investors are increasingly becoming involved with early-stage commercialisation as they search for returns in a low-interest world. Many of these opportunities meet the increasing ESG focus of fund management teams. Creating best practice R&D is critical to nurture and grow advanced manufacturing in Australia.
Additionally, digitisation is an important subset of advanced manufacturing. RSM research shows that our clients are already moving in this direction, with COVID-19 accelerating the adoption of digital technologies. As the COVID-19 pandemic continues, companies face new challenges surrounding their liquidity positions, uncertainty related to supply and demand, and difficult choices about how to keep the business running while lifting productivity and ensuring employee safety.
The shift to digital technology will accelerate as a matter of survival and a “must-have” in order to win. Organisations are looking to ensure their operations are resilient, supply chains are connected across marketing, sales, customer experience and warehouse inventory/management. Many companies are working to fast-track digital transformation projects that were underway before the pandemic hit. Others are questioning their reliance on China manufacturing, whether as a source of components or assembled goods. Various technologies can potentially make it more cost-effective, adaptable, and lower risk to return operations to Australia.
Australian manufacturing leaders will need to be proactive and innovative when considering the benefits of investing in digital transformation.
Additionally, companies need to evaluate their infrastructure to determine whether they have the capacity to take advantage of newer technologies, and available investment capital.
In order to leverage the characteristics of Australian advanced manufacturing, funding support from the Australian government is essential. It not only provides the necessary growth capital for start-ups; in the development phase, it gives confidence to early-stage investors to invest alongside the government. Commercial funding is crucial to fuel these growth opportunities with joint ventures between government and universities, and government and the private sector. More broadly, local and international commercial investment funding will also be required to allow Australian advanced manufacturing to flourish and deliver significant potential wealth for all Australians and the security of the supply chains.
There are however some other challenges that need consideration besides funding. One is the carbon emission reduction challenge, especially in the mining and energy sectors. This is an issue faced by all manufacturing countries. Australia has a much greener natural environment. How to combine the growth of advanced manufacturing together with a greener environment is one task needing more research.
The other challenge is the population problem. There are some different scenarios for population deceleration. And the change of population structures will have a great impact on the future development of Australian advanced manufacturing.
Firstly, the growth of labor supply will become more limited. Technology will therefore be important productivity too.
Secondly, the acceleration of the aging of the population will affect the scale and structure of total demand. All of these may exert tremendous pressure on the existing real economy, including real estate and real estate chains. The manufacturing industry will be affected by population changes. After all, the population is the foundation of housing growth/demand. Furthermore, due to the status of housing in the current economic structure, it will be impacted by demographic challenges and further affect related manufacturing industries from all directions.
In conclusion, to reinvigorate Australian advanced manufacturing, the focus needs to be on creating world-leading R&D and embracing digital trends and funding support leading by Government and industry. It is also critical we factor in how to create a greener Australian environment and actively address the issue of population deceleration whilst growing Australian advanced manufacturing.
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