The news has not been good for manufacturers lately. Job losses at Bluescope’s Port Kembla operations, the squeeze on exports from a high Australian dollar and low-cost importers have questioned the long-term viability of the industry, which inevitably spawns the ‘protectionist’ versus ‘free market’ debate. One camp argues we should be doing more to protect our manufacturing industry with some saying tariffs are the answer. Others say the manufacturing downturn was unavoidable, signifying a broader industry decline and a refocus on the more rewarding resource sector.
Putting these perspectives aside for a moment, there are some salient points to consider when contemplating manufacturing’s role that were articulated well in an article by The Australian1. Firstly, Australia has a distinct market advantage as Asia’s supplier of raw materials, with its share of the economy doubling to 10% in less than a decade. Secondly, the high value of the Australian dollar is boosted by our relatively stable economy compared to those of the US and EU. Both these points suggest the future boom times are going to be focused on the resource sector and in Asian markets.
Thirdly, and perhaps more subtly, there is the emergence of resource/energy-based clusters. This is where groups of companies from one nation band together to take advantage of market positions – a concept highlighted by economist Michael Porter in his 1990 book “The Competitive Advantage of Nations”. These clusters are not solely dominated by resource/energy-based providers, in fact just the opposite. These clusters comprise key enabling industries such as manufacturing to ensure projects are delivered on time and to budget. By boosting the capabilities of these enablers, the quality and delivery of the end product is also boosted.
QMI Solutions has had an active role in boosting manufacturers’ capabilities through its Major Project Supplier Program. Companies, as part of a any supply chain, can rate themselves against a list of criteria project owners seek in suppliers. The suppliers then identify the low scoring criteria and put an action plan in place to improve its capability. Thanks to the MPSP, PPW Steel won $10 million of work on the Gateway Upgrade, Ipswich Motorway Upgrade and Luggage Point Recycled Water Treatment Plant.
Additionally, QMI has signed an agreement with QGC to pilot a program improving local businesses involved in the Queensland Curtis Liquefied Natural gas (QCLNG) Project. Working with QGC, we elected six business from across the QCLNG Project area, including three well engineering-related companies, an electrical and refrigeration company, Gladstone Festivals and Events and indigenous business Mandandanji Ltd. Subject to the success of the initial program, we would be keen to roll it out more broadly and really grow businesses in the regions who are facing what is a once in a life time opportunity to grow.
So back to the ‘protectionist’ versus ‘free market’ debate. I do not think either extremes do much to foster a viable, long-term manufacturing industry. As the main generator of technology and innovation, a high proportion of R&D spend and five-fold jobs multiplier, it is obvious we need a vibrant manufacturing industry. As shown in its challenges from previous times, the industry is resilient and a master of reinvention, and the good news is that manufacturing jobs will come from the industry cementing itself as a key enabler for emerging sectors such as resource/energy. The even better news is that it is already starting to happen.
1 Old talk on tax and jobs, The Australian Online, 13 September 2011, http://www.theaustralian.com.au/business/opinion/old-talk-on-tax-and-jobs/story-e6frg9p6-1226135167979