How to save Australia’s manufacturing sector

Despite Prime Minister Julia Gillard’s commitment earlier this year to the future of manufacturing in Australia, the fact is that with current policy our manufacturing base is largely unsustainable, except in some key strategic areas where subsidies may be important to maintain some capability.

Military application falls into this category, and so too agriculture, if we can categorise this as the manufacturing of food which is essential to our survival.

As for the rest, the future seems bleak under the present government policy.

Innovation can be the solution

Innovation has often been cited as the saviour of Australia’s declining manufacturing base. We need to support innovation and the development of new products, technologies, processes and systems but this alone will not sustain our manufacturing sector, as long as  present government policies prevail. 

Is IP protection the answer?

New products and innovations that are the subject of IP protection can lead to sustainable manufacturing. But ask yourself this question: Why would you manufacture any new product in Australia (or any other product for that matter) when you can make it for much less in China and import it (with little or no duty) then sell it at a much greater profit?

In short, it is simply uneconomical to manufacture most items in Australia, and to do so is little more than an act of altruistic patriotism. An obvious answer is to impose duties to protect our manufacturing base, but with both the Labor and Liberal commitment to Free Trade Agreements, this is unlikely to happen. A different solution needs to found.

A possible solution

If the government was to offer a tax holiday, for perhaps five years, on Australian inventions and innovations, it would have a trickle-through effect.  It would kickstart local manufacturing, create jobs and stimulate and support Australian innovation.  The cost to the government would be negligible and further revenue would flow to the government from taxes on employees, reduction in unemployment and the activities surrounding the creation of new facilities to support these new ventures.

The incentive to develop and localise industries with new products would be profound.

Is anybody listening?

I wonder if those in government would consider this suggestion, for without a drastic change in policy it seems likely that manufacturing in Australia will cease to exist within the next decade.