Australia to pour $13 billion into manufacturing to ensure nation ‘makes things here again’

SYDNEY - Australia has launched a A$15 billion (S$13.3 billion) scheme to promote manufacturing and new technologies to address longstanding concerns that the country “doesn’t make things any more” and is too reliant on exporting its abundant resources.

The new scheme, called the National Reconstruction Fund, was a signature policy of the ruling Labor Party, which was

elected last May

on a promise to boost investment in manufacturing and the uptake of technology.

The move follows growing concerns about the country’s vulnerability to supply chain shocks as well as its economic over-reliance on China, which in 2022 accounted for 27 per cent of Australia’s total trade and 30 per cent of exports.

Minister for Industry and Science Ed Husic said the scheme was one of the largest peacetime investments in Australian manufacturing. It will provide loans, investments and guarantees to projects in the field of renewables and low-emissions technology, agriculture, medical science, transport and defence.

“We are trying to rebuild and revitalise manufacturing at a time when we’ve been dependent on concentrated or broken supply chains,” he told Sky News last week. “We’ve got the geopolitical environment we’re operating in where we do need to reduce those dependencies.”

The scheme aims to address concerns about the make-up of Australia’s economy, which receives massive revenue from exporting raw items such as natural resources and agricultural produce, much of which is processed abroad. A report in 2020 found that Australia had the least self-sufficient manufacturing sector of any country in the Organisation for Economic Cooperation and Development, which includes 38 developed economies.

A separate study of 133 countries by Harvard University in 2020 found that Australia had the 91st most complex economy. The top five countries in the list – which measured a country’s ability to produce a diversified and sophisticated set of products – were Japan, Switzerland, Germany, South Korea and Singapore.

Australia has often come up with breakthroughs that led to remarkable technological innovations – such as the black box flight recorder or the cardiac pacemaker – but then failed to properly develop and commercialise the products, which ended up making a fortune for makers overseas.

More recently, Australia was a world leader in developing solar panel technology. But the relatively high production costs led to the industry being taken over by China, which benefited as several leading researchers who had worked and studied in Australia took up positions in the Chinese sector.

Mr Husic said: “We’ve seen so many great ideas that have left our shores only for us to import them back as products that somebody else has manufactured.”

Famously, former Labor prime minister Kevin Rudd once lamented the sorry state of Australian manufacturing, stating in 2007: “I don’t want to be a prime minister of a country that doesn’t make things any more.”

Last weekend, Prime Minister Anthony Albanese struck a similar tone, declaring that he wanted a “future made in Australia”. Alluding to Mr Rudd’s promise, he said the new scheme will boost Australian skills, industry, manufacturing, and our capacity to “be a country that makes things here again”.

“(The scheme) will strengthen our economic sovereignty,” he said in a speech in Tasmania. “We said during the election we’d make more things here in Australia. And we’re getting it done.”

The scheme will involve an independent board that will decide which projects to fund. Any revenue generated will then go back to the scheme to fund new projects.

Business groups and unions have largely supported the scheme.

The Australian Industry Group, a leading national business association, welcomed the National Reconstruction Fund, saying it would help to grow and diversify industries.

“The (scheme) is a vehicle that could help position Australia to benefit from the digitalisation, automation, artificial intelligence and the clean energy revolution that is remaking global industry,” said the head of the organisation, Mr Innes Willox.

But the opposition Liberal-National Coalition criticised the scheme, saying the federal government would need to borrow money to pay for it and that it would result in support for projects that would not be backed by the private sector.

Dr Jarryd Daymond, an expert in innovation and entrepreneurship from Sydney University, said the scheme could succeed in boosting manufacturing and innovation, but that it needed to be supported by efforts to promote education, training, university research, and a suitable skilled immigration intake.

“Projects won’t succeed without skilled workers, strong research backing, and easy access to suppliers and customers,” he wrote on The Conversation website.