Factory reset, but with the correct IR settings – by Michael Stutley

Australia has a rare opportunity to reset its manufacturing sector. But the IR parameters must be correct, says Michael Stutley.

Since the peak of the 1960s, Australian manufacturing has been in decline.

In the sheltered economy of this period, it generated over a quarter of GDP and employed about 25 percent of the labor force.

Today, the manufacturing sector’s share of GDP has fallen to around 6% and employment figures reveal a similar statistic, its nadir being the exit of the three automakers, Ford in 2016 and Toyota followed by Holden in 2017 .

His fall from grace largely reflects a free trade mentality – particularly among Canberra’s economic mandarins and the media – that sees industrial policy as shorthand for protectionism.

Almost by osmosis, free trade has become accepted economic orthodoxy.

Yet in poll after poll Australia wants manufacturing, even if it means higher prices – a public sentiment that intensified during COVID when our vulnerability to imports during a global pandemic became apparent.

Certainly, politicians have detected this public mood.

To much fanfare in 2020, the former coalition government announced the $1.3 billion Modern Manufacturing Initiative and the six National Manufacturing Priorities – Minerals, Food, Medicine, Clean Energy, Defense and Space.

Labor has gotten in on the act with its ‘A Future Made in Australia’ policy to revitalize manufacturing, which it says is ‘a comprehensive plan to create jobs, boost vital skills by investing in education and training, bringing industry expertise ashore and increasing national productivity’.

A key component is a $15 billion National Reconstruction Fund, with $1 billion allocated to companies in the areas of resource value addition and mining science and $1 billion to advanced manufacturing.

Prime Minister Anthony Albanese is, in my opinion, on the money.

Let’s be a country that does things again. Not just because we can add value. Not just because it gives us supply chain security.

But because it offers vast opportunities, starting with skills development, rewarding careers and improving our balance of trade.

Coming from Western Australia, I believe reviving manufacturing through our abundance of minerals is a sustainable option.

For too long we have shipped our natural resources overseas to be sold to us for gold. For example, Australia has its own reserves of lithium and zinc, key battery ingredients.

Why not add value to these minerals instead of importing batteries.

It means we have to be smarter. We have the raw material, the know-how, a trained workforce and the educational institutions to ensure that future employees have the necessary skills.

If politicians need another reason, let me assure them – it’s politically popular.

This is not an argument for the tariffs and quotas of yesteryear; Australia will never again have labour-intensive textile, footwear and garment industries.

This is an argument in favor of a coordinated and targeted national industrial policy with a long-term vision as opposed to a short-term and hasty approach.

Avoiding the latter will be essential. History tells us that when taxpayers’ money is at stake, when certain projects are prioritized, it often results in poor labor practices, chaos in industrial relations and low productivity.

So the big question is whether we can put in place the right industrial relations structure that will encourage investment, ensure profitability and generate returns for shareholders.

In my opinion, we need a serious policy that:

  • Supports skilled migration to revive our minerals industry to ensure we stay ahead of the pack in renewable energy
  • Provides certainty to employers and employees in the form of a base minimum wage and standards – not from an award perspective, but think of base wage combined with productivity/bonuses/participation benefits that give employees a sense of belonging and pride in the industry
  • Removes the complexity of rewards and restores corporate-level relationships to a fair and sustainable foundation. Provide a conducive supply and demand environment to conduct contract level negotiations
  • Increases training and development opportunities to build the skilled workforce of tomorrow
  • Is supported by a bipartisan political approach to provide certainty rather than political ammunition
  • And supports industry in regional Australia.

So how can the Labor Party achieve this? True to form, we’re hosting another summit, this time the Australian Job Summit.

Labor says it will inform a white paper on full employment and, no doubt, with a largely revitalized manufacturing sector.

But we know from experience that summits are usually reserved for a few: unions, government and private sector bodies.

It’s a good start, but in my opinion, we need companies, investors and, if possible, employees around the table.

We need those who will be at the forefront of this march towards renewable energy, resource development and manufacturing to be able to express their views. They know better than anyone what is needed.

This is our chance to have a summit that matters, that leads to industrial policy that pays fair wages, ensures capital investment, generates revenue and enables returns on investment.

For 50 years, Australian manufacturing has so slowly contracted in importance.

Today, political will, backed by public opinion, is creating an environment conducive to a manufacturing renaissance. Let’s not waste it.

Michael Stutley is a Perth-based partner of Australia’s largest national employment law firm, Kingston Reid. He has worked in employment, security and migration law for over a decade in industries as diverse as manufacturing, construction, mining, maritime, mining, aviation, immigration and health care.

Photo: Michael Stutley

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