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A view on: Australia’s manufacturing industry

Welcome to the first in our new series of video collaborations with SBS. In this episode, Dr Phillip Toner, a Senior Research Fellow in the Department of Political Economy at the University of Sydney…

Welcome to the first in our new series of video collaborations with SBS. In this episode, Dr Phillip Toner, a Senior Research Fellow in the Department of Political Economy at the University of Sydney, gives his view on Australia’s manufacturing industry.

Do let us know what you think and, if you like what you see, spread the word.

Full video transcript:

Many people seem to equate manufacturing with 19th century technology, with the steam engine and grease, but in fact that is not the case.

What is manufacturing? It is pharmaceuticals, it’s advanced industrial chemistry, it’s advanced materials, nanotubes.

Consider the car industry. It draws on an extraordinarily wide-range of advanced technology and services, advanced metallurgy, machining. Consider the millions of lines of code that go into engine management systems and safety systems of modern vehicles.

Australia is just one of 13 countries in the world that have the capacity to go from the drawing board right through to the production line and the showroom - and every country that has that capacity seeks to nurture its industry. The modern motor vehicle industry sits at the very heart of a national input-output system at the very heart of its national science and technology base.

Well, so what? Surely the resource sector can fill the gap? But in fact under present policy settings the resource sector draws most of its advanced components - its advanced manufactured inputs - from overseas, in contrast to many other countries with large resource sectors, such as Norway.

The other consequence of increasing dependence on a large resource sector is that growth in the economy and tax receipts of governments will become increasingly volatile as a consequence of the large swings in commodity prices and national income.

It is explicit government policy to shift resources away from manufacturing and other non-resource based industries into the resource sector. This sets up a vicious cycle; every time there is a boom in the resource sector, the rest of the non-resource parts of the economy are actually forced to shrink.

Another consequence of the decline of Australian manufacturing is this ever widening trade deficit as we increasingly import more of our manufactured products.

The Australian science and technology base is fairly fragile.

The science and technology base in Australia is much more dependent on government funding than in many other countries. There really isn’t the type of political consensus that can ensure its continued funding.

We can ill-afford to lose an industry such as manufacturing which is so science and technology intensive. 25% of total private sector R&D is conducted by manufacturing. You go back ten years and the figure was 50%. It is simply not sustainable in the long run for a country to embark on a strategy (whereby) it can think it can retain the advanced science and technology but outsource manufacturing. It is simply not possible in the long run to divorce those two.

The continuing and rapid decline of the manufacturing industry isn’t inevitable. There is undoubtedly a cost in attempting to retain a large and sophisticated manufacturing industry. However what we have to consider is, what is the cost of its continued decline?


Further reading: Australia’s choice: the ‘high road’ to productivity or a race to the bottom

Join the conversation

37 Comments sorted by

  1. Peter Watson

    Geologist

    Extremely important issue, correctly identified.
    However, try to avoid making the camera and editing styles performers in their own right, competing with the content. Have a look at the RSA animations/videos and the TED talks. They are often very stylish and well edited, but they remain extremely tight, succinct, and every frame is made to count. The shooting scripts have often had as much work done on them as the narrative script. Stick to the content. Make the visuals in front of the camera tell the story. Content is not assisted by gratuitous tracks, pans, zooms, tilts, extreme close ups, jump cuts, crossing the (eye) line etc. What has happened here is the content has been subsumed by intrusive 'style' rather than reinforced and complimented. It has the opposite effect to that which is intended and renders the narrator a talking head.

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    1. David Stonier-Gibson

      Electronic Engineer/Small business owner at SPLat Controls - electronic control systems

      In reply to Peter Watson

      I felt the same. Then I thought "well, it was probably done by a junior/trainee, so I will be tolerant. The youngens have to learn somehow, and this is clearly not targeted at SBS prime time."

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    2. David Stonier-Gibson

      Electronic Engineer/Small business owner at SPLat Controls - electronic control systems

      In reply to David Stonier-Gibson

      Oh, and yes, the reason it's not aimed at prime time, even on SBS, is because your average punter wouldn't care a toss, let alone understand the issues.

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  2. Joseph Bernard

    Director

    "what is the cost of its continued decline?" -

    I think the answer is depends. There is a need for a risk managed perspective that factors in a number of variables that consider the health of our economy for the next 100 years rather than just the next election.

    So in a well managed model which looks at the factors and judges whether that specific decline is unacceptable then we should expect the government to step in and protect that industry so that it survives the current cycle.. Where…

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  3. David Collett

    Sales at https://aussiebuilder.com

    It sounded a little like a grant/subsidy application to me.

    Sound economic thinking is required to overcome these challenges, as Joseph mentions.

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  4. Iain Brown

    Retiree

    I had never thought of all the advanced engineering that goes into car manufacture. I always get the impression that Australian businesses are only focused on producing at the lowest possible cost and not what the locals want. Meanwhile, Mercedes sales have surpassed Ford. It must because Australia car owners are struggling to maintain their Fords. Can someone explain how Germany is the home to several vehicle manufacturers who dominate around the world.Yes, I know that Europe has a larger population but can that be the only reason. To many, German vehicles are desirable .Could Australia develop a vehicle that is innovative?

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    1. Frank Moore

      Consultant

      In reply to Iain Brown

      Iain Brown, Australia hosts foreign car manufacturers. We don't have an Australian manufacturer.
      In the free trade world, the size of your home population is irrelevant. You are better off with 1 percent of the US market than 60% of Australia's.
      Billions have been spent keeping these foreign manufacturers viable in Australia. Mostly they lack the authorisation to make anything but routine clerical level decisions in Australia.
      Contrast this with South Korea's decisions...

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  5. Lincoln Fung

    Economist

    I agree with the view of one of the commentators that this sounds like a grants/subsidy application, or appeal.
    I think whoever argues for continued subsidies to support some ailing manufacturing industries need to consider how Singaporean and Hong Kong economies that don't have a car manufacturing industry are in general more competitive than Australian economy.
    This is particularly so given the current stage of the world economy where software and creativity are increasingly taking a more important role in the economy, just think about smart phones, Google, Facebook, Youtube, etc.
    Those who argue for continued supports through very costly subsidies seem to be living in the past and have not caught up with the advances of the past 20 years or so.

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    1. Phillip Toner

      Adjunct Professor, UTS Business School at University of Technology, Sydney

      In reply to Lincoln Fung

      Hullo Lincoln,

      You may find the following description of state industrial policy in Singapore useful

      Chia Siow Yue (2005) The Singapore Model Of Industrial Policy:
      Past Evolution And Current Thinking, Singapore Institute of International Affairs
      http://www.adbi.org/files/2005.11.28.cpp.singapore.industrial.policy.pdf

      The picture that emerges is one where the stste is quite active in governing the market- using tax holidays; specfic infrastructure investments; R&D support etc to promote investments in specfic sectors consistent with evolving long term plans for the Singapore economy. An interesting side-light on this is that the Singapore govt runs a highly successful sovereign wealth fund, Temasek Holdings, that is the majority share owner of Singapore Airlines and the Singapore electricty system.

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  6. InnoFuture

    logged in via Twitter

    I don't think that anybody still thinks about manufacturing as a 19th century steam engine or grease.

    But most minds on both sides of the 'great manufacturing divide' are still stuck in the 19th century management models that include these outdated elements - for starters:
    1. Disconnected supply chain model - based on a Gantt-style sequenced relationships, rather than on new, multi-connected, co-creating collaboration ecosystems;
    2. Patriarchal hierarchy Management - command and control, when…

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    1. William Raper

      Retired

      In reply to InnoFuture

      I think you should look a lot deeper than management issues, important though they are.

      Past government policies have led to (encouraged?) most high technology manufacturing industries to be owned by multinational corporations. Think oil refining, petrochemicals, pharmaceuticals, computers for example. I know from personal experience that multinationals seize any opportunity to move R&D effort to their headquarters and then charge the (Australian company) for it whatever they wish, thus reducing their taxable income.

      An important exception to th

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    2. William Raper

      Retired

      In reply to William Raper

      Sorry again for poor typing skill!

      Important exception to this are some of the car manufacturers, but the future looks grim if the bean counters get their way. Believe me, the "level playing field" is a joke. For example look at the present inquiry into profit reporting by electronic companies in Australia.

      It was not a good idea for Australian governments to avoid "picking winners" and encouraging them as Singapore has done so well.

      In answer to Ian Brown, Germany has a highly competitive car industry, excellent engineers and access to a very large market. Like Japan, more attention is paid to engineering excellence over a very long period. It is decades since BMW decided to make "the best car in the world" when they were little known, and Mercedes were dominant.

      The best our governments can do is to talk of the "clever country" and then make cuts again and again to the universities and CSIRO, while spending squillions on middle class welfare.

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    3. wilma western

      logged in via email @bigpond.com

      In reply to William Raper

      I agree -both major parties have been bamboozled by the so-calleed free marketeers and chase Free Trade Agreements that don't benefit most Oz producers , and recoil in horror if it's suggested they should "pick winners" .An amusing corrective to this attitude in "23 Things They Don't Tell You About Capitalism " by Ha- Joon Chang .

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  7. James Hill

    Industrial Designer

    With a religio-conservative, anti-science, anti-technology government about to be elected as a result of a blatant anti-intellectual campaign of media propaganda you can just about kiss manufacturing goodbye in Australia.
    Sorry, a bit of Real-politik enters the debate.
    While companies are just as capable of setting up manufacturing concerns in Australia as anywhere else, thanks to the ten year, trillion dollar mortgage debt orgy of crass middle class snobbery, enabled by that arch-middle class…

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    1. David Stonier-Gibson

      Electronic Engineer/Small business owner at SPLat Controls - electronic control systems

      In reply to James Hill

      Do you think the other side of politics is any more pro-manufacturing? Really?

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    2. James Hill

      Industrial Designer

      In reply to David Stonier-Gibson

      They certainly have shown no understanding of unsustainably high house prices as the cause of job exports, and the consequent decay of manufacturing and the slow enslavement to chronic unemployment.
      But then they are not alone are they?
      Just look at the asset price inflation in cities like Perth as the Fly-in Fly-out donga dwellers jack up, with their high salaries, the cost of housing to everyone else trying to survive the lower-speed non-mining economy.
      Though beyond the cynicism concerning…

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    3. David Stonier-Gibson

      Electronic Engineer/Small business owner at SPLat Controls - electronic control systems

      In reply to James Hill

      Ouch.

      You make an interesting point about the social responsibility, or lack of, in the large mining companies. I am happy that my company's product, in this case, is making a contribution, however small, to reducing CO2 emissions (our controllers turn off the a/c when the donga is unoccupied).

      I am also painfully aware, and usually point out in conversations around the lunch table at work, that the mining companies are spending money on these controls only because the power saved comes from…

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  8. Dale Bloom

    Analyst

    I would agree manufacturing jobs can be very interesting and enjoyable work, as the worker can directly see the results of their work.

    If the product being manufactured is an improvement over previous models, then the worker can see this as well.

    A worker cannot see much of an improvement in increasing output from a mine.

    One of the biggest industries in Australia is the housing industry, and there are now new houses being built that are were so squashed together, houses can have eves near the top of the back fence. No improvements can be seen at all with the housing industry, even though the housing industry has been operating for many years.

    So, comparing manufacturing to industries such as mining or building new houses, there are definite rewards in manufacturing.

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  9. Peter Fraser

    Director

    Couldn't agree more with Peter Watson. The constant switching around of the visuals was annoying and distracting. I want to concentrate on the content of what's being said rather than the antics of the camera operator or editor. It adds nothing to the story and it seems to assume that we need to be entertained by the clever editing rather than being informed by the content. It's nothing new in modern TV reporting but is not only unnecessary but distracting and annoying.

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  10. Brad McDonald

    Senior Designer

    I agree. These sorts of video are important ways to get the message across, however the camera work and editing was gratuitous and unnecessary; the close up of Dr Toner's mouth and moustache were, to be honest, faintly ridiculous...

    I'd suggest using graphics to break the "talking head" sections up to illustrate particular points, like the relationship between manufacturing and R&D for example; this point is made in the video, but not really hammered home, in spite of it being possibly the most…

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  11. David Stonier-Gibson

    Electronic Engineer/Small business owner at SPLat Controls - electronic control systems

    My company is currently enjoying a mining led mini-boom. We have two contracts to make (different) devices to control the air conditioners in dongas - http://tinyurl.com/ceyoujr -, about 4000 pieces in each contract.

    We make the controls here, and then ship them directly to Thailand and China, where the dongas are built. You can imagine what percentage of the total value of each donga is being made by us in Australia!

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  12. ILANA CULSHAW

    Retired Language & Humanities teacher

    It is interesting that the examples of manufacturing shown in this video are all at least 25 years old - basic metal pressing and transfer lines with a robot or two - press technology pre-world war II and robots like these having been around for 25 years at least.
    Way back then, we in manufacturing knew that the critical essence was not just running stamping lines and assembly plants, as this video projects. It was in the design and production of the robots; the research and specification of advanced…

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  13. Gary FitzGerald

    logged in via Twitter

    What I saw was the amount of R&D spent by manufacturing. Just another area where we are seeing resources as not investing their fair share in Australia, whether by low tax, subsidies etc

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  14. Robert Tony Brklje
    Robert Tony Brklje is a Friend of The Conversation.

    retired

    The real focus of manufacturing maintenance should be on defence and essential infrastructure. Defence is largely a waste industry where all of manufactured product is largely destroyed (or in a most foolish manner sold to drive military adventurism) as such the capital expenditure must be more properly be justified.
    Using military expenditure to maintain local expertise and to ensure supply in time of need is far more sound, than just being available to waste in times of peace.
    Similarly with…

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  15. Dao Nguyen

    logged in via Facebook

    Focus on hi-technology to save manufacturing industry: (i) Australia is good in bio-tech; (ii) Green-tech is a new growing industry Australia can excel in; (iii) Catching up with other industrialized countries in Nano-tech which will have widespread influence on all other industries.

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  16. Robert J. Thomas, Sr.

    Retired corporate counsel

    Here in the U.S. much of our industry also has been destroyed or hollowed out because of unfair trade with Red China, who I view as engaging in low level war against us. One large result is that it is now extremely difficult for less educated people to have anything like a semblance of a middle class life, which was very commonly available here in the past. The reason is that the manufacturing worker often adds a great deal of value, and that addition is what sustained the middle class life. I'm…

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    1. Frank Moore

      Consultant

      In reply to Robert J. Thomas, Sr.

      Robert J Thomas Sr, you do know that from Clinton onwards, every one of your Presidents have failed US manufacturers and their employees: this snippet is classic Clinton stupidity - of which almost all the worlds media and academia supported:
      "During a press conference on March 29, 2000, Clinton said that granting China permanent normal trade relations (PNTR), which allowed China to gain entry into the WTO, would be a great deal for America. "We do nothing," Clinton said. "They have to lower tariffs…

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    2. David Stonier-Gibson

      Electronic Engineer/Small business owner at SPLat Controls - electronic control systems

      In reply to Frank Moore

      I call it the Walmart effect. Not only is it destroying the US economy, but container ship after container ship loaded with Chinese cr@p are also contributing to the destruction of the planet, to the sole benefit of one family. The same, of course, is happening here, only we don't have Walmart - yet.

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    3. Frank Moore

      Consultant

      In reply to David Stonier-Gibson

      Yep David Stonier-Gibson, all our retailer conglomerates are Import Centric and PRC centric - supporting this monstrous regime and their human rights abuses in the process. These conglomerates get incredibly favourable treatment from such Gov't Bodies as the ACCC and to accentuate the profits of importation they have pushed for mass immigration of yet more import customers. Finally, for every 10 bucks you spend at Bunnings this weekend - how much goes to PRC military arming - including nukes?

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    4. David Stonier-Gibson

      Electronic Engineer/Small business owner at SPLat Controls - electronic control systems

      In reply to Frank Moore

      Frank, are you old enough to remember the 80's, with economic rationalism and level playing fields?

      I made myself a bumper sticker: "Level the playing field. Raize our game!". Pity no-one took any notice! They probably didn't "get it".

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    5. Frank Moore

      Consultant

      In reply to David Stonier-Gibson

      And raized our game they did! Remember that a veritable conga line of [Lathamesque] suck holes have been given great photo opportunities as the beneficiaries of our "largesse" - our willingness to betray our fellow Australians - give positive pats on the back for the various quislings walking into their rooms. Usually resplendent in foreign flags - and the odd token Australian Flag - as we all find out about the "benefits" of multi-nationalism. Always at the expense of Australians. The Lost Billions pays for those photo opps.

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    6. Robert J. Thomas, Sr.

      Retired corporate counsel

      In reply to Frank Moore

      Right on. Someday someone will have to explain to me why the Anglo-Saxon states are the only ones in history who have decided to commit cultural suicide by inviting the hordes to their shores. Note that the successful states of East Asia have not done this and will not do this - they spend their riches on their own people, and don't let themselves be hoodwinked by the many false claims and much coached claims of refugee "persecution". which often amounts to nothing more than the rest of the world dumping its trouble makers on the naive Anglo-Saxons.

      Remember that the refugee treaties were adopted as a reaction to real persecution of the Jews in WWII, not to the phoniness of today, a recent example of which in the US was the Boston bombing where the Left there let in a so-called Muslim refugee family originally from Russia who had already found refuge in one of the former Muslim countries of the former USSR. You see the horrendous result.,

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    7. David Stonier-Gibson

      Electronic Engineer/Small business owner at SPLat Controls - electronic control systems

      In reply to Robert J. Thomas, Sr.

      Inaccurate rant. Norway takes more refugees per capita than Australia, by a big margin.

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  17. wilma western

    logged in via email @bigpond.com

    What about food processing? Not exactly high tech except perhaps for dairy processing, but more and more processed veg and friut products coming in from Thailand, China, Greece, Belgium ( spinach) , you name it, while SPC Ardmona tell fruit-growers to get rid of their canning peach trees. Bikkies from China and Fiji, etc etc. co-op sugar mills sold off to the Chinese . At least they'll keep operating, one supposes, however....

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