Australia needs new manufacturing heroes

With technological investment, flexible work arrangements and the right trade agreements, Australian manufacturing can compete globally. But we need local champions to spearhead the transition.

All Australians, but particularly ministers Andrew Robb, Ian Macfarlane and Barnaby Joyce, must appreciate the wider consequence of the dramatic events now taking place in the Bathurst-Orange region. They have considerable significance to what is happening in both the motor and diary industries.

In my first commentary today I set out the dramatic changes taking place (How Coles and Woolworths are revolutionising food processingOctober 31). Here is my take on what we learn.

1) Despite the high Australian dollar, Australian manufacturing can be economic if the latest plant is installed and modern flexible work practices adopted with no demarcations. The advances in technology reduce labour costs.

2) The carbon tax was a huge blow to all the Simplot plants and many other manufacturing plants, so workers and farmers can be very thankful that Tony Abbott won the election. But even without the carbon tax, shift allowances and penalty rates prevent economic use of plants and cost jobs.

3) To justify the investment to make plants economic, manufacturers must have a base market. Simplot can keep its revamped plants open because it has a base Coles and Woolworths market for three years. Electrolux in making Kelvinator-Westinghouse white goods at Orange had similar bad work practices and lack of investment to Simplot in Bathurst. With investment and a base market, theoretically, Electrolux-Kelvinator-Westinghouse could have stayed open.

But it really did not matter how economic the Electrolux-Kelvinator-Westinghouse plant at Orange was made. Electrolux wanted to shut the plant and sack the workers because the Swedish giant had invested its money in Thailand and wanted to make the Thai plant economic via Australian demand.

4) As Simplot has shown, global companies can be national champions. But they are also dangerous because, as Electrolux shows, if they are the major producer in a rival country and their international agenda favours making in a different region, then Australians can be scrubbed. When these global groups buy into Australia they mean well but new managers come in and circumstances change.

5) In dairy, Australia desperately needs a national champion to compete with the scale of New Zealand, which is currently decimating our exports. And so the New Zealand dairy champion Fonterra and the Canadian-Argentine-US dairy giant Saputo would be equally dangerous, despite having the very best of current intentions.

6) In automotive, the big problem is not so much that we can’t make cars economically but that the avalanche of competition means we have no base market. And the bad trade agreements we did with Thailand and the US severely restrict access to these markets. They were described as “free” but while we gave free access, we did not get it back – at least in automotive (Do we need a car industry? October 16).

The government creates a major motor demand via its fringe benefits tax scheme. It was introduced to help local cars when there were tariffs. The FBT concessions should be restricted to locally made cars, so providing a market. That would keep at least 100,000 people off unemployment benefits, so it is very cost effective given the FBT money is committed.

7) For years companies like Simplot (and its predecessors), Electrolux, General Motors Holden, Ford and a vast number of other companies (including now closed coal mines) gave 3 or 4 per cent wage rises (or more) without productivity gains. Many of the managers who did this then found plant investment uneconomic. That game is over. In food, Coles and Woolworths have forced the game change and it’s spreading. Consumers are the winners.

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