Australian PM Set to Bolster Local Manufacturing

Australia's Prime Minister Anthony Albanese reacts as he speaks during a press conference in Sydney on Dec. 20, 2023. David Gray/AFP via Getty Images

Prime Minister Albanese has recently outlined his ambitions to bolster Australia’s industrial capabilities in 2024 as a key tenet of federal government policy.

Speaking at a press conference on Jan. 3, the prime minister stated his desire for a more extensive manufacturing base that will lead to “additional jobs.”

“Through value adding, moving up the supply chain, making sure that we do make more things here, which is about Australian jobs here. And that’s what our engagement with the world is about as well,” Mr. Albanese said.

Mr. Albanese also articulated his plans to continue to repair Sino-Australian trade relations after a tumultuous few years.

“We’re making enhancements to improve our trade relationships. Including the removal of any impediments to any trade with China.”

“We know those impediments led to some $20 billion (US$13.4 billion) reduction in our trade, and we’ve seen that step up and we'll see further advances in that this year, as we saw at the end of 2023, the removal of some of the impediments to some of the meat supplies going into China.”

Revitalising Australian industry has long been on the agenda of the Albanese government.

In the federal budget released in October 2022, it announced the inception of the National Reconstruction Fund (RCF)—a financing vehicle allocating $15 billion (US$10.1 billion) in government funding to drive investment in critical sectors.

Priority sectors include renewables and low-emission technologies, transport, medical science, defence capability, and resource-based commodities.

The government has confirmed that it will allocate $3 billion of the fund’s endowments to investing in green metals—metals conducive to clean energy manufacturing—and a further $1 billion to value-adding in Australia’s natural resources sector.

$1 billion will be channelled into the expansion of technologies like artificial intelligence and robotics, while another $1.5 billion is reserved for medical manufacturing.

Agriculturally-based primary sectors like farming and fishing will also receive $500 million.

The NRF has also implemented certain requirements for funding proposals or applications.

Investments cannot be made in projects that directly finance fossil fuel extraction and deforestation. Before an investment can be approved, its impact on Indigenous Australian peoples must also be thoroughly vetted.

Australia’s Deindustrialisation

Australia’s industrial capabilities have experienced an exponential decline since their prime output in the 1960s, when manufacturing accounted for 25 percent of national gross domestic product (GDP). In 2022, that figure was just 5.42 percent.

According to government employment bureau Labour Market Insights, approximately 870,000 Australians are currently employed in manufacturing, comprising 5.6 percent of the workforce. In 1973, Australian manufacturing employment peaked at 1.46 million.

Although this is commonly attributed to a number of factors, including wage competitiveness, globalisation, and the inexorable shift towards a service-based economy, a lack of economic diversity is also a cited reason.

The Harvard Atlas of Economic Complexity (ECI) measures the diversification of a country’s export basket and the degree of sophistication of those goods themselves, i.e. do they require a complex manufacturing process?

ECI rankings are also placed irrespective of GDP. There are a number of countries with low ECI rankings but high levels of GDP.

Australia, despite having the world’s 18th highest GDP per capita, is ranked 93rd on the ECI. Developing nations like Guatemala, Kenya, and Eswatini are placed higher.

Matt Barrie, CEO of Freelancer—the world’s largest online marketplace for freelancers—has frequently voiced his concerns.

“We’re a very primitive country in terms of what we export. We dig out of the ground what is basically dirt, which is iron ore, and stick it on a boat to China. We dig up dead trees (coal) and ship it overseas to Japan and China,” Mr. Barrie said on ADH TV in 2023.

“Australian government policies have led to a situation with a country that has a manufacturing as a percentage of GDP on par with a financial haven like Luxembourg, on par with Botswana where you can go see Cheetahs.”

An example of Australia’s lack of economic diversification is steelmaking. Australia is the world’s second-largest exporter of metallurgical coal and the largest exporter of iron ore, the two components needed to produce steel.

It doesn’t, however, sit as one of the world’s top 20 steel exporters, instead preferring to export both iron ore and metallurgical coal as raw exports.

Australia’s diversity of trading partners is also relatively low. According to the Department of Foreign Affairs and Trade (DFAT), China accounts for 32.2 percent of Australia’s exports. Conversely, China only relies on Australia for 7 percent of its exports.