There is a growing realisation that Australia’s economy could become a sequel of Back to the Future.
The closure of Australia’s motor vehicle manufacturing industry with the departure of GM, Ford and Toyota and move of all oil refining and fuel production to Asia is further isolating and marginalising Australia consigning the country to primary producer role.
Back to where we started. Back to the sheep’s back and mineral exports…
The latest economic growth figures show that we are still tracking very well with a 3.5 per cent growth rate, which is still largely underpinned by the mining industry which contrary to popular mythology has not gone away but continues to reap billions of dollars from our nation’s mineral gifts.
Clearly the changes pushed along by the Federal Government to rid us of multinational manufacturers have not come with a plan for what might replace them nor what will happen when the oft predicted end of the mining boom occurs.
The first question we have to ask is whether we need a manufacturing sector in this country. Can we complete with the low labour costs in Asia? Why not ship off all our raw materials to Asian countries where it can be turned into products faster, cheaper, without those pesky unions and workplace safety rules?
But it seems that having a manufacturing sector is essential to the health of an economy, at least that is what Professor James Heskett, of the Harvard Business School, says.
Writing in the HBS newsletter Working Knowledge, Heskett says :”It both fuels and results from innovation. It is natural in the course of economic activity that ‘factory jobs’ (a perhaps too-commonly used term, not mine) are tradable on international labour markets. They especially follow the migration of manufacturing activity involving jobs requiring lower skills and compensation. Efforts to revive high value-added manufacturing in the US and UK will have to be based on higher productivity, not necessarily more of those good ‘factory jobs’ of the past. They may not have the desired results if the goal is to create more jobs.”
Heskett’s article shows that even in its weakened state, manufacturing remains a surprisingly large part of the U.S. economy. The sector generates more than 13% of the nation’s GDP, making it a bigger contributor to the economy than retail trade, finance or the health-care industry. In China, manufacturing represents 34% of GDP.
Sadly the same can’t be said of Australia where the latest figures have manufacturing at 6.8 per cent of the economy in 2012-13 down from 9.2 per cent in 2002-03.
Table: March Quarter 2014 Industry Contribution to Australian Gross Domestic Product*, 2002-03 to 2012-13 (%)
So if Australia is to revive this vital sector, it will be up to the Small to Medium Business community to take the lead. Nearly 90 per cent of our manufacturing capability is in the SME sector.
The value adding manufacturing of quality good is a niche that can be developed and can be cost effectively positioned.
They, the SMEs, will need innovation and the use of new technology is vital if this is going to work, but then many of the tools to allow this to happen are here already.
Robots… yes, a new generation of smart tools are available to give local manufacturers back the competitive and financial edge they need.
I have to declare that I represent one robot company, Universal Robots, a Danish organisation which has developed a low cost, lightweight, sophisticated industrial robot.
It is these robot solutions which are providing small to medium business with some of the tools which will form the basis of a manufacturing revolution and help to reignite our manufacturing competitiveness.
Alberto Elfes, Science Leader for Robotics at the CSIRO, says that the fears that robots will take jobs from workers is largely unfounded.
He points out that the creation and manufacture of robots is a rapidly growing industry with more than 150,000 people employed in that industry at last count. He also says that the fact that robots boost productivity means there is more capital to employ more workers.
Research undertaken by Universal Robots has shown that in most cases where a robot has been installed, the workers who had previously undertaken the task have been reassigned to other more skilled and less repetitive tasks within the company further enhancing productivity.
According to Alberto Elfes, the new lightweight robots can be integrated into Australian companies in three ways. Firstly, as what he describes as “intelligent tools” which operate as smart picking, lifting and handling systems undertaking jobs such as welding, gluing and assembling on an automated production line.
The second area identified by Elfes, is where robotics are used to enhance human abilities with devices such as powered exoskeletons which allow workers to lift and manipulate heavy loads safely.
The third are those field tools where Australian innovation is already leading the world. These include driverless trucks and excavators used in the mining industry.
There is an opportunity for Australian entrepreneurs in the SME sector to rebuild our manufacturing capability. By embracing new technologies and driving innovation, something in which we are already a world leader, we can create the jobs and opportunities that will be required for future economic growth.