Industry and Manufacturing Policy: Rebuilding Australian Industry and Manufacturing for Economic Sovereignty

Preamble

Australia’s economic future hinges on a robust, innovative, and self-reliant industrial and manufacturing sector. For too long, we’ve leaned on overseas corporations, watching our businesses erode and our economy falter under foreign dominance. This policy aims to reverse that trend, fostering Australian-made products, spurring innovation, and encouraging domestic investment to drive growth. We will reclaim our industrial strength, boost employment, and secure prosperity for Australians, not multinational bottom lines.

The Decline of Australian Industry and Manufacturing

Australia’s manufacturing sector has shrunk dramatically, dropping from 28% of GDP in the 1960s to just 6% today, employing fewer than 850,000 people. The Australian Bureau of Statistics (ABS) notes that while total industry earnings grew by $93.4 billion (12.9%) in 2022-23, manufacturing’s share remains dwarfed by mining ($274.7 billion in earnings) and services. This decline stems from:

• Business Losses: Iconic manufacturers like Ford, Holden, and Toyota shuttered local plants between 2014 and 2017, costing over 50,000 direct and indirect jobs. High operational costs—electricity prices among the OECD’s highest at $0.30/kWh—and a lack of investment drove them offshore.
• Gains in Niche Sectors: Some advanced manufacturers, like Cochlear (medical devices) and Austal (shipbuilding), thrive, with ABS data showing machinery and equipment earnings up 18.8% ($1.1 billion) in 2022-23 due to government defense spending. Yet these gains are outliers, not the norm.
• Foreign Corporate Control: Multinational giants dominate what’s left. BHP (Melbourne, Australia, but with significant global ownership) outsources fabrication, like 20,000 tonnes of steel for its $4.7 billion South Flank project, to Asia. Rio Tinto (Melbourne/London) follows suit, prioritizing cheap offshore labor. In renewables, Goldwind Australia (China), First Solar (USA), and Neoen (France) control key projects, siphoning subsidies abroad.

This reliance on foreign corporations has hollowed out our economy, with manufacturing exports falling from 25% of GDP in the 1990s to below 10% today, per Reddit discussions and historical trends. We’re a “big pit mine,” exporting raw materials while importing finished goods, losing value-add opportunities.

Current Issues and Their Root Causes

1. High Costs and Low Investment: Electricity costs cripple competitiveness, while investment in manufacturing machinery has dropped 26% ($20 billion) since 2008, per The Strategist. Investors chase real estate and mining, not factories.
2. Over-Reliance on Imports: We import $400 billion in goods annually (ABS), from cars to solar panels, because local production can’t compete with cheap foreign labor (e.g., China’s $0.05/kWh power vs. ours).
3. Lack of Innovation Support: R&D spending is just 1.8% of GDP, below the OECD average of 2.7%. The R&D Tax Incentive helps, but red tape and delayed payouts stifle startups.
4. Foreign Dominance: Overseas firms control supply chains, leaving Australian SMEs as minor players, not leaders. This drains wealth and jobs offshore.

Policy Vision: Australian-Made, Australian-Led

We propose a bold shift to prioritize Australian industry and manufacturing, focusing on:

• Australian-Made Products: Rebuild capacity in steel, automotive parts, and consumer goods, ensuring quality and local branding.
• Innovation and New Ideas: Fund cutting-edge technologies like advanced robotics, green steel, and bio-manufacturing to leapfrog competitors.
• Domestic Investment: Incentivize Australians—individuals, super funds, and businesses—to back local industry, not foreign stocks or property.

Policy Recommendations:

1. Scrap Inefficient Subsidies and Redirect Funds:
   • End Renewable Energy Subsidies ($29 billion since 2013): The LRET and SRES prop up foreign firms like Goldwind and Neoen with little local manufacturing gain. Scrap them, saving $3–$5 billion annually.
   • Cut Corporate Welfare for Mining Giants: BHP and Rio Tinto get tax breaks worth $10 billion yearly but offshore jobs. Redirect this to Australian manufacturers.
   • Fund Source: Reallocate these $13–$15 billion annual savings into a Manufacturing Innovation Fund (MIF).
2. Boost Effective Processes:
   • Enhance the R&D Tax Incentive: Streamline claims (current 43.5% offset is good but slow) and raise it to 50% for firms making Australian products, costing $2 billion more annually but spurring innovation.
   • Expand Defense Manufacturing Model: ABS data shows defense spending lifted transport equipment jobs by 21% (15,000 people). Extend this to civilian sectors like rail and green tech, with $5 billion from MIF.
3. New Initiatives for Growth:
   • Manufacturing Innovation Fund (MIF): $15 billion annually to seed startups and scale SMEs in priority areas: steel, advanced materials, and consumer goods. Grants ($50–$500 million) for firms committing to 80% local content.
   • Energy Cost Reduction: Subsidize industrial power to $0.10/kWh via a $3 billion grid modernization plan, funded by MIF, to level the playing field.
   • Australian Investment Incentive: Tax breaks (20% deduction) for super funds and individuals investing in local manufacturers, aiming to shift $50 billion from property/mining over five years.
   • Buy Australian Act: Mandate 50% local content in government procurement ($150 billion annually), boosting firms like Austal and creating 100,000 jobs.
4. Rectify Current Issues:
   • Cost Competitiveness: Cheap energy and tax incentives cut production costs by 30%, per industry models.
   • Reduce Import Reliance: Tariffs (10%) on non-essential imports fund a $10 billion Local Production Grant, targeting 20% self-sufficiency in five years.
   • Innovation Surge: MIF partners with CSIRO and universities, tripling R&D output in a decade via $2 billion in matched funding.
   • Break Foreign Control: Ban foreign firms from MIF unless 50% of operations are Australian-based, empowering local players.

Economic Impact

• Job Creation: 200,000 new manufacturing jobs in five years, per multiplier effects (1 job creates 2–3 indirect roles).
• GDP Growth: Lift manufacturing to 10% of GDP ($200 billion) by 2035, reducing import bills by $80 billion annually.
• Wealth Retention: Keep $50 billion yearly in Australia, not overseas coffers, via local investment and production.

Corporations to Watch

• Local Leaders: Cochlear (Sydney) and Austal (Perth) show what’s possible; expand their model.
• SMEs to Scale: Firms like Spee3D (Melbourne, 3D printing) and Titomic (Melbourne, metal tech) need MIF backing.
• Foreign Shift: Force BHP and Rio Tinto to onshore fabrication or lose tax perks, redirecting their $100 billion revenue to Australian jobs.

Conclusion

Australia’s industrial decline isn’t inevitable—it’s a choice. By scrapping wasteful subsidies, enhancing proven tools like R&D incentives, and launching a Manufacturing Innovation Fund, we can rebuild an economy that works for Australians. This policy rejects reliance on foreign corporations, betting instead on our ingenuity, resources, and resolve. Let’s make it Australian, make it innovative, and make it now.