Manufacturing In Australia

The Australian Manufacturing Industry – Recent History

The Australian manufacturing Industry has been in decline since the early 1980′s. Reasons for this are varied but some of the commonly cited reasons include;

  • Outsourcing to China. This trend took off in the mid 1990′s with manufacturers realising they could create significant savings on their cost of manufacture by outsourcing all or part of their manufacturing to China. Savings of up to 70 percent were possible as Australian wages, for example, were often 12 to 20 times that of their Chinese counterparts.
  • Reduction in Federal Government subsidies. The textiles industries and Electronics industries were examples where removal of tariff’s imposed on ‘cheap’ imports, essentially closed businesses overnight in some instances. A commonly touted example being the local T.V. manufacturing industry. In Marrickville in Sydney’s inner west for example, there were 2 sizable television manufacturing facilities, employing up to 3,000 people in their hay day. These companies manufactured the entire electronic assembly and outsourced to local companies items like cabinet ware, metal fabrication, paint work, printed circuit board manufacture and a host of other parts. When the Labor Government slashed the tariff on consumer electronics we saw price drops in television sets in the order of 60 to 70 percent. Great for the consumer, but the ramifications for industry were severe to say the least. Within six months companies like Pye¬†were closing their doors and many thousand of employees were made redundant. This has a ripple effect on all the local ‘feed-in’ companies that supplied electronic components like wire wound resistors, capacitors and semiconductors. These companies were impacted greatly and their manufacturing volumes dropped proportionately.
  • Changes In technology. The electronics industry is a case in point of Australian manufacturers being slow to embrace emerging technologies and manufacturing techniques. The electronics industry, again is a good example of this. In the mid 1980′s a new breed of componentry and automatic assembly called ‘surface mount’ became the dominant way of building circuit boards for anything from computers to telephones to industrial electronics to power supplies. This new technology mean that assembly costs of circuit boards could be reduced by around 60 percent. The Australian electronics industry was relatively slow in the uptake of this technology though. The initial upfront cost to purchase these “surface mount machines‘ was in the order of $100,000 for a small machine, up to $500,000 for a high capacity machine. The benefits were, speed of assembly, quality of assembly and cost reduction of finished products. Whilst Australian companies were slow to take up this technology, countries like Taiwan, China and Malaysia embraced it quickly. Rather than investing locally, many Australian manufacturers chose the ‘outsourcing’ option and sub contracted their assembly work to these overseas groups – to the detriment of the local industry.

Is This Decline in Local Manufacturing Reversible?

Sadly, it is the case that the ‘horse has bolted’ for many local industries. The electronics industry, at its height employed around 600,000 people directly or indirectly in the early 1980′s. The industry today would be lucky to employ 5 percent of that figure. What can be done? Here are my thoughts:

  • Government MUST support locally developed technologies with emphasis on LOCAL manufacture
  • Small businesses should be given incentives to manufacture locally – not ‘subsidies’ but assistance in set up costs.Australian Made - Local Manufacturing
  • Governemnt should put its money where its mouth is and procure LOCALLY made products wherever possible.
  • Assistance should be made available to Australian companies manufacturing offshore to ‘bring home’ their manufacturing. Obviously this cannot be feasible for heavily labour intensive manufacturing like the textiles industry and ‘low end’ consumer items, but it can and would work for high technology, non labour intensive industries.

Why We Need A Manufacturing Base In Australia

Manufacturing does not need to be a thing of the past in Australia. A vibrant manufacturing industry, tailored to high technology, renewable energy, modern transportation, infrastructure and the likes creates huge employment opportunities for the next generation. As stated above, manufacturing, like most other industry generates a huge number of ‘feed’ industries that are needed to support manufacturing. The car industry is a classic example of this. The car industry may directly employ 200,000 employees nationwide, but another 400,000 may be employed in component industries that feed into the automotive manufacturers.

 

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