Senate debates

Wednesday, 9 February 2022


Economics References Committee; Report

6:52 pm

Photo of Kimberley KitchingKimberley Kitching (Victoria, Australian Labor Party, Deputy Manager of Opposition Business in the Senate) Share this | Hansard source

I move:

That the Senate take note of the report.

I'm pleased to have the opportunity to speak to the tabling of the Senate Economics References Committee's report into the Australian manufacturing industry. I want to thank my colleague Senator Chisholm, the chair of the committee, and the other members of the committee for the work that has gone into this report. I also want to thank Mr Mark Fitt, the committee secretary, and other members of the secretariat for the support they have given to the committee's work.

This is a timely report, as we are nearing the end of this parliament and the voters will soon have an opportunity to decide our country's course for the next three years. Among, I think, the many issues that will be before the voters will be industry policy; and, as the majority and minority reports that are now before the Senate make clear, the voters will have a choice because the policy approaches from the coalition and from the Labor opposition are different.

This report documents the sharp decline in Australia's manufacturing capacity over the last 30 years. As a share of the total economy, manufacturing has fallen from about 16 per cent in 1986 to seven per cent today. Over the past 20 years, employment in manufacturing has fallen by 100,000, while employment in the services sector has correspondingly risen. Australia has shifted from a manufacturing economy to a services economy. This seismic shift in the Australian economy has been the direct result of the economic reforms of the Hawke and Keating governments between 1983 and 1996, particularly the demolition of the tariff wall that had sheltered Australia's inefficient and non-competitive manufacturing industry since Federation. I don't make any apologies for those reforms. I'm glad of them and I'm glad of the consequences of them. Despite the cost to Australia in terms of manufacturing employment, the Hawke-Keating reforms have been of huge overall benefit to Australia. One of the reasons that we have had 30 years of almost uninterrupted growth and prosperity is that inflation has been held down by waves of very cheap consumer goods from Asian countries, which means that wage gains achieved through higher productivity have not been eroded by inflation as they were before 1983.

But we have to acknowledge that the world of 2022 is not the world of 1983. Under Deng Xiaoping and his successors, the People's Republic of China seemed to be heading towards becoming a genuine market economy, towards integration into the global rules-based trading system represented by the World Trade Organization and towards becoming a reliable and responsible trading partner for Australia. Instead, under President Xi Jinping, China has reverted to a state directed economy, in a quest for regional hegemony in both the economic and political spheres, and to a trade policy which rewards subservience to the Chinese Communist Party's agenda and punishes countries, such as Australia, which defy Beijing's diktats.

This development has exposed the perils of overreliance on a single trading partner, a single market for our exports and a single source of imported manufactured goods, particularly high-tech goods. We find ourselves dangerously exposed here. Remember, we haven't had enough PPE in the last couple of years. Indeed, Labor's trade and resources shadow minister, Madeleine King—who, may I say, would serve excellently in these roles in government—has called for a diversification of Australia's trade profile. She has argued, as have I, that we should be doing much more to engage with India and especially our neighbour to the north, Indonesia, which has a fast-growing middle class, as well as other regional ASEAN nations.

Our dilemma has further been cruelly exposed by the supply crisis brought on by the COVID pandemic, unfortunately now entering its third year. As I've said, we've faced successive shortages of masks, personal protective equipment, respirators, vaccines and, more recently, rapid antigen tests. It must be acknowledged that a contributory factor has been the difficulty in securing these products at a time of universal demand for them, not least in the source country.

We must face up to the fact that Australia's manufacturing policy settings are no longer fit for purpose. We cannot go on with an economy that relies on bulk exports of raw materials such as iron ore and coal to pay for a stream of manufactured goods from China and other Asian countries. No-one, certainly not I, is suggesting that we should return to the high-tariff regime of the decades before 1983. As the US under President Trump discovered to its cost, erecting tariff barriers just invites retaliation from trading partners, starting a trade war which finishes up harming both sides. But Australia does need to take serious measures to stimulate a revival of manufacturing in this country, both for reasons of national security and so that we are never again caught short by a supply crisis of essential manufactured goods as we have been over the past two years.

The Labor members of the Senate Economics References Committee have made a series of carefully considered and economically responsible recommendations which will, if implemented by an incoming Labor government, send our manufacturing industry policy in a new direction. They include measures to facilitate both public and private investment in manufacturing both for export and for the domestic market. They propose measures to increase the level of superannuation fund investment in manufacturing industries. They propose significant increases in support for research and development to improve and stimulate the development of self-sustaining manufacturing. Most importantly, they urge the revival of Australia's vocational education sector, particularly by ensuring that vocational courses in occupations with current or forecast skills shortages are accessible and affordable. Only by doing this can we restore the skills base needed both for a viable defence manufacturing sector and for high-tech medical and scientific production, which we obviously need much more of. Labor state governments, such as the Andrews government in my home state of Victoria, have begun this process by reviving the TAFE system after it was allowed to be run down so dangerously by previous governments, but I think this requires national leadership, and that must come from a Labor federal government.

I'd also like to note that Senator Patrick has supported the position taken by the Labor members of the committee. I would say that Senator Patrick has shown his usual good judgement. In his additional comments, aptly titled 'Stop just exporting rocks', Senator Patrick makes the point that, as important as the resources sector is to the wealth and prosperity of our nation, we cannot be content with just being a quarry.

No-one is suggesting that we should abandon our resources sector. A rush to do this would leave a huge revenue gap, not to mention the social devastation. Indeed, what would we replace this with in the short term? What services would need to be cut? What is clear, though, is that we need to couple this with more diversity in our economy. We rested on the economic windfalls that came in year after year in the lead-up to the GFC, and now we're behind the eight ball when it comes to diversification.

Part of the problem is that we lack complexity in our economy. We haven't invested enough in research and development or upstream value-added industries, and we heard quite a lot of this in the evidence on one of the hearing days. According to the Harvard Atlas of Economic Complexity, a index that measures the sophistication, diversity and opportunities of various nations, Australia ranks 86th in the world on the list, behind Iran, which is at 80, Albania, at 83, and Paraguay, at 85. While in many ways this is a simplistic measure, it does point to a problem. In contrast, Singapore, a country that has almost no natural resources and has to import both water and sand, ranks at No. 5 on the index. Since gaining independence in 1965, Singapore has invested heavily in research and development to become a world leader in numerous industries, notably in fintech and pharmaceuticals. There is no reason Australia cannot do something similar if we put our minds to it. Of course, we also have the great example of Israel. Ensuring Australians are better educated, better trained for work and reskilled has never been more important. If we don't do this, our economy is going to go backwards. We won't remain at 86; we'll be out of the Atlas of Economic Complexity. Productivity growth should be front and centre on our list of policy priorities.

From flight recorders to electronic pacemakers, Google Maps, penicillin, the bionic ear, plastic lenses, Gardasil, wi-fi and even the Hills hoist, Australian brains have provided countless inventions for the betterment of humanity. But we've stopped inventing things and making things, and these success stories belie the fact that today we have the same export profile as Uzbekistan. We all watched with horror as the former Treasurer, in the other place, goaded the local car industry to leave Australia. That was unacceptable and unforgivable. The men and women who worked in this industry and their families and loved ones have not forgotten.

When it comes to manufacturing in this country, we must have reformers and thinkers. There is a dissenting report, which I presume Senator Scarr will speak to. But there was a lot of interest, I think, from all committee members.


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