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Whereto Industry Policy?

The announcement today by Prime Minister Malcolm Turnbull to establish a new Centre for Defence Industry Capability (CDIC) headquartered in Adelaide adds a new dimension to Australian Government industry policy, crafted in the lead-up to a Federal Election.

 

This new ‘industry growth centre’ by another name ‘aims to foster and drive innovation in the defence industry in Australia and open up export opportunities.'

 

According to the Prime Minister, a key initiative of the 2016 Defence White Paper, the CDIC is being structured to bring together the private sector, Defence and AusIndustry to transform the relationship between Defence and industry to help deliver cutting-edge capability for Australia’s armed forces.’

 

The Government has committed over 10 years, an investment of $230 million investment for CDIC which is expected to create jobs and drive growth in Adelaide.

 

The CDIC is being planned to work with ‘small-to-medium enterprises across Australia to promote defence industry competitiveness and guide the priorities across defence industry. The centre will also offer a range of advisory services including mentoring, defence market access, export facilitation and global supply chain development.’

Compared to other industry growth centres (six so far have been announced), annual funding averaging some $23 million per year is well in excess of the $3.5 million per annum committed to other centres such as ‘advanced manufacturing’, and the other key difference is that there is no announced commitment that the CDIC (unlike other growth centres) has to be self-funding within four years.

 

Reflecting on ‘advanced manufacturing’, the latest information from Canberra suggests that the Advanced Manufacturing Growth Centre is looking at establishing further hubs in major clusters of industry and research innovation (following the advanced materials hub in Waurn Ponds, Geelong and the additive manufacturing hub in Clayton, Victoria). This could include digital manufacturing in Brisbane.

 

Meanwhile, the manufacturing industry is waiting for projects to emerge from the Innovative Manufacturing CRC, another government funded initiative which is well and truly ‘dragging the chain’, not that this delay can be attributed to government inaction.

 

However, with no sense of urgency in government and with little evidence of industry leadership, the much trumpeted rebirth of Australian advanced manufacturing may seem more illusory than reality.

 

To track performance, the Manufacturing on the Move management team has already suggested to Government that key KPIs are urgently required and these could include

For Innovators:

1. SMEs introducing product or process innovations as % of SMEs.

2. SMEs introducing marketing or organisational innovations as % of SMEs.

3. High-growth innovative firms.

For economic effects:

1. Employment in knowledge-intensive activities (manufacturing & services) as % of total employment.

2. Medium/ high-tech product exports as % total product exports.

3. Knowledge-intensive services exports as % total service exports.

4. Sales of new to market /new to firm innovations as % of turnover.

5. License/patent revenues from abroad as % of GDP.

In the absence of targeted KPIs, the only measure available to the Government and industry is the Purchasing Managers' index (PMI) which is published regularly by the Ai Group. The PMI is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. This broadscale measure can be overly influenced by changes in high volume sectors such as food and metals processing to the extent that trends in the more intensive, hi-tech and ‘high value add’ sectors such as in areas of advanced manufacturing can easily be missed.

There is much to be done in Australia to get our advanced manufacturing sector on the right trajectory for growth in export sales and jobs. There is no time like the present, notwithstanding the intervention of elections and inconsistencies in government policy making dressed up as arguably unmitigated ‘pork barrelling’.

Angus M Robinson

Co-Moderator, Manufacturing on the Move

8th March, 2016

Education and Government funding
Australia - An Economy Under Transition

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