Tuesday, 4 March 2014
I think we have all heard, over and over again, the catchcry that manufacturing in Australia is in crisis. I would like to suggest to everyone here that in fact it is not in crisis at all; it is under stress, but it has been in gradual decline for more than 40 years, and I think that is what we have to deal with and get used to. There is certainly more happening in the manufacturing sector with its shrinkage right now than there has been in the most recent past, but we are not talking about a new situation here. Manufacturing has been declining in Australia over at least the last 30 years. In 1990, 1.2 million people were employed in manufacturing in Australia. By 2000, just 10 years later, we were down to one million people working in manufacturing. Today it is closer to 900,000 and, as we all know, that number is continuing to shrink.
But I think, Mr Acting Deputy President Smith, you would agree with the comments made today by the Deputy Prime Minister around the fact that it is not just the headline grabbing—'Jobs going' and 'Manufacturers closing'—that we should be concerned about. We might lose 5,000 jobs in one hit from one place, but we have had tens and tens of thousands of jobs disappear from smaller manufacturers, even Australian icons, over the past 30 years. It seems to me that Labor's view is that, unless there is a large union involved to let them know that there are jobs disappearing, they do not acknowledge that it has happened.
As a share of GDP, manufacturing in Australia has shrunk from more than 20 per cent in the 1970s down to eight per cent today. That is not just something that has happened with a few headline-grabbing closures; it has been a steady decline of manufacturers of all sizes. For a while we actually managed to maintain our output, but in the last few years even that has shrunk. Whilst this decline now seems acute, as I said, with shutdowns of motor vehicle production and the deterioration of iconic firms like SPC and Qantas, we need to put it into a context and not come up with crisis driven solutions but see it in a context of a decline that has been going on for well over 30 years.
The difficulties in car manufacturing come into sharp focus, but I must admit that I have always been a little curious about our obsession with the car industry and supporting it in Australia. It has always seemed to me to be something of a case of boys and their toys. I have never understood why we are not as concerned with other industries. It was put to me at one stage that having a car-manufacturing industry was important for national security. On that basis, I would have thought having a computer-manufacturing industry could have been considered quite important too, but we do not. It has been put to me that having a car-manufacturing industry was particularly important for innovation and because of all the downstream industries that hung off it. I think that is the case for any manufacturing industry at all. Speaking to a friend tonight, I was pleased to hear that we still make our own hot-water systems in Australia. I am sure that the companies involved do not sit there and knit their own lagging. I think there are plenty of downstream businesses and other manufacturers that rely on that sort of manufacturing as well.
The death knell, of course, for the car-manufacturing industry came when our third manufacturer, Toyota, announced that it was also going to exit Australia, along with Ford and GMH. Apart, as I said, from the direct job losses, thousands of other jobs will be at least under threat in companies that are currently component manufacturers, some of which currently rely completely and utterly on those three brands for all their work. I guess you would think that, as a manufacturer, you were probably fairly safe if you had all your eggs in three baskets. Unfortunately, they were all the same sort of basket—they were all car manufacturer baskets. I think it says something about the fact that not only the car industry but companies that were reliant on the car industry had perhaps become somewhat too comfortable if all their business relied completely on those three manufacturers. It suggests that they really had not done very much to manage the risk in their business if they relied completely and utterly on the car industry in Australia.
Of course, I cannot begin to understand what it must be like to be someone who works for one of those companies, with the need to reskill and, in some cases, perhaps even move yourself and your family to look for new work in a different sector. But I said—and I think I was misunderstood when I said it in this place some time ago—that I thought no job was preferable to an unsustainable job. What I meant by that was that, in most cases, people who lose their jobs are often jolted; they retrain and start to rethink the way they pursue their career.
All of us are somewhat averse to change. It can be too easy for any of us, including the people who worked for those car component manufacturers, to stay in a job because it is there, not because you are enjoying it, not because you see it as having a long-term future, but simply because it saves you from having to think about what else you might do in your future. I would hope sincerely that the majority of people who are affected by these closures ultimately come to see this change as an opportunity and not as a disaster for them.
SPC, Australia's largest fruit processor and canner, has pledged to grow new markets and make new products that better suit what SPC refers to as the modern lifestyle. Dr Sharman Stone from the other place, who I think launched a very strong fight on behalf of SPC, said the other day that sales had almost doubled since the problems at SPC. Presumably that is not only because of the publicity but also because Australians do not want to see the last vestige of a local manufacturer disappear from the area.
I remember as a child that my mother would always buy an extra can of Golden Circle products. For those of you who do not have the benefit of living in Queensland, Golden Circle was a cooperative that canned primarily beetroot and pineapple. As a good Queensland child, you grew up with a strong influence of pineapple and beetroot in your diet, because it was the right thing to do in Queensland to support Golden Circle. I am sure we were not the only family in Brisbane that had an extra can of beetroot or an extra can of pineapple at least once a week to do our bit for Golden Circle. Mr Acting Deputy President Smith, you might be not unsurprised to know that Golden Circle is now owned by a multinational company and in fact does very little manufacturing in Queensland.
Qantas are the latest addition; although they are not a manufacturer, they come within the gamut of supporting Australian jobs in Australia. By scrapping the Qantas Sale Act, getting rid of the barriers to foreign investment and freeing the flying kangaroo from its shackles, I think we are acknowledging what we have to do in the future, not just for Qantas but for all our industries. The companies I have been talking about are symbols of our past. They are a comfortable way of looking at things, but they ignore the reality of technological change and they ignore the reality of the world that we now compete within. Chris Berg in TheAge recently argued that big factories are a symbol of Western prosperity. He said they are 'as much cultural icons as they are venues for production'.
I love a big factory as much as the next person—probably a lot more than the next person, in that I come from a manufacturing background and run large machines, one of which in fact is the biggest in the Southern Hemisphere. Whilst we need to protect our manufacturing, we also need to acknowledge what we are protecting and why we are protecting it, and we need to protect manufacturing in a sustainable way. Our role in the future may not be to assemble cars in Australia—in fact it absolutely will not be—but instead we could be designing cars or constructing high-value car components to be shipped offshore to places that build cars at a more competitive price than we do. We in Australia have to find new ways of doing business. Otherwise the recent closures of iconic industries and the recent problems in the manufacturing sector mean that we will be left behind.
The decline in Australian manufacturing does not have to be inexorable. As I said earlier, in the 1980s and 1990s manufacturing in Australia actually expanded and the proportion of our manufactured output that was exported increased. All of that growth was in elaborately transformed manufactures—the kinds of goods that require good, recent technology and a skilled workforce to produce. This growth in manufacturing was achieved through a combination of industry plans and deregulation of both the manufacturing and the banking sectors. The industry plans encouraged research, development, innovation, investment and exports—although in some cases they encouraged too much reliance on government-backed investment. The industry plans aimed to increase the scale of Australian manufacturing and to move us up the value chain to those high-return areas, the elaborately transformed manufactures that I was talking about before. A large part of the success of those manufacturing programs was due to floating the dollar and winding back tariffs. It is worth noting that the Australian dollar at that stage was actually worth US75c. As we all know, since the mining boom the dollar has gone above US90c and for a long time was above parity. It is almost impossible for Australian industries to compete when they have the handicap of the Australian dollar being 30 per cent above the US dollar in value.
Australia's wage structure seriously affects our ability to be competitive. Labour costs in Australia average $46 an hour. In the US they are $36 an hour and in China they are $3 an hour. No-one in their right mind would suggest that we want the sort of wage structure that China has, nor would anyone suggest that we should have some of the attitudes to workplace health and safety that China has. I have actually seen people in China wearing thongs and shorts in a factory environment. I just cannot believe what would happen if some of the workplace health and safety officers whom I know here had seen that. It certainly would have caused serious problems for them and that is not what we want. We do not want to be like China, but we need to work smarter to ensure that we maintain our share of the manufacturing world.
One of the issues with the GFC and the high Australian dollar was that companies did not have the opportunity to borrow funds and the Reserve Bank has said that lending to smaller businesses dried up during and after the crisis. I was interested in a comment in today's HeraldSun. A thought that had not come to me before came from Mr Terry McCrann, who made the point that we continue to guarantee the debts of our banks but of no-one else, in the sense that during the GFC the Australian government guaranteed the bank deposits of Australians in Australian banks. It was one of the moves that certainly assisted us in remaining as strong as we did during the GFC, but you wonder now why this is continuing. Why do we continue to guarantee the bank deposits? The government are certainly not guaranteeing anyone else's debts or potential debts. So I think it is time that the banks are taken out of the equation.
With respect to manufacturer SPC, I must admit that I was surprised at some of the comments that were made by their parent company, Coca-Cola Amatil, regarding the plant and equipment that they had. But the point was that, despite having all the funds to reinvest, Coca-Cola Amatil could not see that there would be a sufficient return on their investment if they replaced the plant and equipment that was overdue for replacement. I think this is a big issue right through manufacturing in Australia. Since the GFC, as I said, there has been difficulty in borrowing money. Many small businesses have, in fact, gone to the wall. Very viable businesses have gone to the wall because they were not able to borrow when they needed it to upgrade plant and equipment or to make other purchases that they might need to keep themselves in business. So I think we need to examine the ability of these companies and their access to credit.
We currently have issues with the mining industry in that it is reaching a maturity and the cost of energy for all of manufacturing is a big problem. In terms of mining, we are coming to the end of the capital investment phase and, once we start to see only production happening, we will be seeing fewer people employed by the mines. Again, according to the Australia Institute, in 2011, more than 80 per cent of the profits from those mines will be going offshore to foreign owners.
We could argue that that is more than reasonable, given that most of the investment that led to the development of those mines came from offshore. I am certainly not arguing that we should be doing anything to stop those companies reaping the benefits, but that will not help us to employ more people in Australia. We need to think about the challenges that we face for our future and the fate of all that expertise in all those industries that have closed down not just recently but also over the past 20 years. We must again, in my view, focus on elaborately transformed manufactures.
Some companies in Australia are already doing a brilliant job in being competitive in science-based niche manufacturing, where we can build on our research and on the fact that we have a well-educated workforce. Cochlear, ResMed and CSL are all companies that come to mind as companies that are being competitive and doing very well, irrespective of the high dollar.
At the same time we need to grow our basic manufacturing base. We need small companies that can respond quickly to local demand. But we need to put those companies in the situation where they can get finance, where they can get advice on business methods, where they can get help to develop their markets and work in the export field. We need to make it easier for them to employ people, to pay their taxes and to comply with environmental regulations. We need to make sure that they can supply the bigger companies—like the Coles, the Woolworths and the Bunnings of this world—on even terms.
In short, I think we need to move well past the mindset that manufacturing in Australia is dead and actually celebrate and grow manufacturing further. (Time expired)