Government response to driving advanced manufacturing in Australia low on commitment – by Sandy Plunkett

Australia's manufacturing industry will have to continue to forge ahead alone as the government response remains light on details and lack clarity in helping the industry remain resilient. Here, Sandy Plunkett highlights the government's glaring gaps and lack of commitment to Australia's advanced manufacturing.

The primary takeaway from the Federal government’s long-awaited response to last year’s advanced manufacturing sector submission, Sovereign Smart, Sustainable: Driving Advanced Manufacturing in Australia can be summarised in one short sentence: “Please see the Future Made in Australia agenda.”

“Our $22.7 billion Future Made in Australia (FMiA) Plan will drive advanced manufacturing in Australia, helping us to maximise the economic benefits of the move to net zero and secure Australia’s place in a changing global landscape,” the Government said in the introduction to its response to the ten recommendations.

“This will build a stronger, more diversified and resilient economy,”

The Sovereign, Smart, Sustainable report was presented to the government in November last year, in full recognition that the Australian economy and especially its thin industrial base was at a crossroads.

Australia’s sovereign industrial capability has been in decline for sixty years. The sector’s diversity, ambition and technological complexity is still woefully misunderstood, under-resourced and undercapitalised.

The government response to the November 2023  report of the House of Representatives Standing Committee on Industry, Science and Resources arrived exactly a year later.

It was lost amid the flurry of activity that saw the passage of more than 30 bills on the last day of parliament for the year.

The Government somewhat vaguely agreed or agreed in principle to 6 of the 10 recommendations which ranged from appointing a new National Commissioner for manufacturing, establishing common user manufacturing facilities; reviewing skills and training programs for the Industry 4.0 era; and beefing-up the Buy Australian Plan.

The government response referred to a list of programs and intentions covered under the FMiA agenda announced in the May federal budget.

In many ways, it read like an AI Chatbot response where the algorithm was trained only on the FMiA investment mandate and cannot deviate from it.

“I am very pleased that the Report contributed to the Government’s thinking on the Future Made In Australia agenda,” was the one line response from The Chair of the Committee, Mr Rob Mitchell MP.

The top recommendation of the Committee asked the government to appoint a federal level and independent National Advanced Manufacturing Commissioner to facilitate nationwide advanced manufacturing policy and program coordination.

Australia's manufacturing industry needs more clarity, Plunkett argues.

It would serve “as a single, high profile “shopfront” for federal and state government opportunities and support programs for manufacturers, and provide a concierge service to assist small manufacturers, in particular to identify and access suitable opportunities.”

But that key recommendation from industry earned only earned a “noted” in the Government response because the government believes it has that covered under the FMiA’s proposed “new single front door” concept.

“As part of the government’s Future Made in Australia plan, we are creating a new front door for investors with major, transformational investment proposals to make it simpler to invest in Australia and attract more global and domestic capital.

“The front door will complement and leverage existing institutions, including the Net Zero Economy Authority, which is focussing on supporting what regions need to transition effectively to net zero – including identifying and facilitating investment.”

The new front door concept was also announced in the May budget and in September the government opened stakeholder consultation. The consultation period closed in October.

The government says the Front Door will provide a single point of entry for investors and companies with major investment proposals; deliver a joined-up approach to investment attraction and facilitation; identify priority projects related to the Government’s Future Made in Australia agenda; support accelerated and coordinated approval decisions; and connect investors with the Government’s Specialist Investment Vehicles (SIVs).

But with a federal election coming in the first quarter of next year, it will be many months before we know the exact form of that front door, who will answer it and where it will lead when stakeholders come knocking.

At the moment, the consultation process and review is driven out of Treasury.

The issue of program and agency co-ordination of the numerous moving parts of the FMiA agenda is industry’s biggest concern.

Large and smaller industry players and investors have been seeking clarity around which government agencies they should engage with at various stages of their project applications and review.

The “front door” consultation paper rightly noted that the complex regulatory framework and slow approval processes in Australia have presented a significant barrier for potential domestic and international investors.

The Front door proposes to relieve this regulatory burden and better coordinate government engagement by providing discrete advisory and guidance services to investors with a centralised point of contact that will help them navigate Australia’s regulatory landscape.

While acknowledging the Government’s intent to improve program co-ordination, create clear pathways for investors and businesses seeking FMiA project approval and navigate a spider’s web of regulatory complexity, several industry participants feel the Government’s proposed version of the “front door” misses the greater value of an independent National Office of Manufacturing Commissioner.

The Advanced Manufacturing Growth Centre (AMGC), led by Dr Jens Goennemann has been a leading advocate for the establishment of a National Manufacturing Commissioner with the express intent to better align all national manufacturing activities.

Key to the efficacy of such a body is that is must be industry-led and independent from the government of the day.

“We believe this is a gap in our national approach and therefore the Commissioner and its office should function as an independent, centralised information and coordination body that federal, state, and local government can tap into to ensure that all initiatives from all levels of Government are pointing at common goals. Such a body must be industry-led.”

Also, a concern is the government’s relatively narrow and unwavering prioritisation of renewable energy and critical minerals projects. The bulk of the nation’s domestic manufacturers are not “pure-play” renewable energy and net-zero businesses.

“I’ve long thought the scope of priorities under the FMiA and the National Interest Framework are too narrow in context of the volume and diversity of well-run and growth-oriented SME businesses in Australia,” said Mr Anthony Healy, the Chief Executive of the Australian Business Growth Fund (ABGF).

The ABGF is a $540 million public private fund set up under the Morrison government and is co-funded by the Commwealth and the four big banks, as well as Macquarie Bank and HSBC.

It is focused on the 6% of Australia’s 2.5 million SMEs that have new-to-the-world technologies and services, invest heavily in R&D and are aggressively pursuing global as well as domestic customers.

The ABGF defines this cohort of 21^st century manufacturers as the “Growth Economy” and is on a mission to prove it as a highly investible asset class.

In the last two years it has invested $180 million in 12 SMEs. The portfolio lists highly diversified Australian businesses operating in digital systems and advanced manufacturing, utilities, skincare, healthcare as well as renewables and decarbonisation technologies.

Many dual use technology companies, from space tech to bio-security to drone manufacturers, also don’t fit neatly under net-zero mission umbrella, but are vital to building the nation’s low economic complexity and security, which aumanufacturing.org.au points out has gone from terrible to worse year after year.

What these companies need, other than growth capital, is domestic customers, including Government customers, which is why the advanced manufacturing Soverig, smart and sustainable report recommended building on the Buy Australian Plan and introduce regular reporting by government agencies on the use of Australian suppliers.

The Government “agreed in principle” to this recommendation.

“Under this, the Department of Finance (Finance) is providing procurement and contract management training to the Australian Public Service to support officials and decision makers in assessing and determining value for money from tender responses to maximise value for taxpayer dollars in delivering positive economic, social and environmental outcomes for Australians.”

Meanwhile, Clayton Utz partner, Samy Mansour points out that the Government’s proposed Front Door is more directly intended to smooth pathways for foreign investors wanting to participate in the FMiA reindustrialisation agenda.

The October consultation process, he says, called for investors to provide their insight and experiences in investing in Australian projects, especially when other jurisdictions such as the UK and Singapore have already implemented concierge-like support models for investors.

This is understandable given competition for global capital is intensifying, first with the Biden administration’s trillion-dollar Inflation Reduction Act (IRA) and now more so with new Trump administration’s intention to gut regulatory burdens in the US.

But it potentially leaves far too many growth companies and domestic manufacturers falling between the many cracks under the FMiA agenda.

The devil, as always, is in the details which are yet to be revealed by the Government. Some may even emerge in the coming election campaign.

In the meantime, Australia’s domestic manufacturers will continue to forge ahead alone, which is an all too familiar state for them.