Manufacturing more resilient supply chains

Australia needs a policy for delivering the minimum manufacturing capacity that would ensure national resilience, security and economic prosperity.

Unfortunately, Australia’s domestic manufacturing capacity is generally declining, except in the defence industry and, in time, maybe renewable energy transition. At the heart of our manufacturing woes are increasing competition from low-cost overseas producers, unfair trade practices, disrupted supply chains and a lack of sustained investment in advanced technologies.

The Australian government must now be clear-minded that a robust manufacturing sector is not just about job creation and economic prosperity; it is an insurance policy to protect the nation. Australia’s vulnerability during the pandemic, when global supply chains faltered and essential goods became scarce, should have served as a wake-up call.

Since then, geopolitical tensions, natural disasters and global market fluctuations have continued to expose our supply chain vulnerabilities and heavy reliance on international suppliers for essential goods and raw materials. Australia’s current shortages of IV bags and palliative care drugs highlight the country’s reliance on fragile global supply chains.

The Albanese government’s made-in-Australia policies and initiatives to boost local solar panel and battery production aim to promote domestic manufacturing in renewable energy. Focusing narrowly on that sector leaves many other manufacturers without the support needed to be competitive, let alone grow. Without addressing skills development, innovation, and supply chain resilience, these initiatives are unlikely to foster a diverse and sustainable national manufacturing capacity.

One of the most urgent priorities is to support Australian businesses in transitioning to modern manufacturing techniques through targeted subsidies, tax incentives and infrastructure improvements. A good starting point would be to bolster domestic production of medical supplies and agricultural inputs using technologies of the fourth industrial revolution. Such investments would reduce reliance on imports, mitigate risks posed by global trade disruptions and strengthen national security. Moreover, they could ensure that geopolitical tensions or economic shocks would not disrupt much of the economy.

Supporting the development of the nation’s skilled workforce is also crucial for the future of advanced manufacturing. Modern manufacturing requires specialised technical knowledge, particularly in high-tech industries, in which automation and digitalisation are rapidly changing production processes.

The government must continue to invest in education and training programs, especially in science, technology, engineering and mathematics, to drive innovation and equip workers with the necessary skills to meet the demands of advanced manufacturing. Such investments have underpinned the national resilience and economic prosperity of Taiwan and Singapore.

Innovation and technological advancement in manufacturing must be further incentivised. As global competition keeps intensifying, Australia needs to catch up in developing and adopting cutting-edge technologies. The future of manufacturing lies in the advanced production techniques of automation, artificial intelligence and 3D printing, plus many technologies still unimagined.

Modern manufacturing addresses the challenge of scale, which has bedevilled Australian business. It enables companies to optimise production processes, reduce lead times and costs and efficiently adapt to on-demand supply needs while maintaining high quality and precision. To maintain a competitive edge in these emerging fields, Australia must lead in adopting and developing these technologies.

The government has made significant strides in supporting innovation through research and development grants, tax credits and partnerships between universities, research institutions and industry. To further enhance this ecosystem, we must find innovative ways to increase funding for research and development initiatives aimed explicitly at advanced manufacturing. This should be done though expansion of tax incentives for companies investing in such technologies. Additionally, establishing regional innovation hubs focused on specific industries, such as biotech, would better support local startups and facilitate collaboration.

This is about more than what the government should do. An ability to quickly adapt to technological advancements would enhance the sector’s efficiency and output and allow Australian companies to seize new opportunities as they arose in an increasingly competitive global market. This forward-looking approach would ensure that Australia remained at the cutting edge of global manufacturing.

With targeted investments in manufacturing capabilities and innovation, Australia’s supply chains would be better protected.

Australia must define and maintain a minimum manufacturing capacity to enhance its national resilience in an age of continuous, concurrent and cascading crises. Hard choices will of course need to be made, but clearly food and health security ought to be key priorities. Through these efforts, the nation can ensure that it remains competitive, resilient and prepared for the complexities of the global economy.

This article was published by The Strategist.