The Impact of COVID-19 on manufacturing
In the wake of the COVID-19 pandemic, it is becoming ever more obvious that the complete lack of support from state and federal governments and industry at all levels has had a possibly terminal impact on Australian manufacturing.
This lack of support has weakened our ability to compete internationally and reduced our industry to the lowest common denominator: cost. This economic rationalist way of living, which delivers short-term savings, will not secure the future of our economy or manufacturing industry long-term.
While hundreds of thousands of people are expected to lose their jobs as a result of the economic flow-on effect of COVID-19, the manufacturing industry continues to operate—quietly, under the radar—and to employ approximately 10% of the population. [1]
The Federal Government has pledged $320 billion, representing 16.4% of annual GDP, to economic stimulus packages designed to bolster the economy in the wake of the COVID-19 pandemic.
What if just a fraction of this $320 billion had been invested into the manufacturing industry over the last ten or 20 years? What if the Federal Government had invested in local manufacturing industries, instead of offshoring work—effectively investing in international economies?
Before it collapsed, the car industry wanted just $300 million a year in government assistance—just 0.09% of the COVID-19 stimulus package. This funding would have been shared across 120 tier one manufacturers and suppliers to keep their factories running and to keep thousands of Australians in jobs. In return, each manufacturer would have invested three dollars for every one taxpayer dollar. [2]
If Federal Government had invested in Australian jobs, companies, and the manufacturing industry as a whole, our economy would be much better positioned to weather the impacts of COVID-19.
So Then, What is the Solution?
Clearly, the COVID-19 pandemic is a disaster. But, let’s hope it offers a silver lining for manufacturing. Let’s hope it opens the politicians’ eyes to investing in the local Australian economy.
We need a commitment from state and federal governments to increased levels of local content for all procurement decisions. We need the big corporates, like BHP, to award local contracts to local companies.
The strength of the sovereign capability of Australia depends on Australians investing in Australia. It might be cheaper in the short-term to buy from Thailand, China, or South Korea, but all this does is weaken our economy.
If Australia is ever going to re-pay the $320 billion stimulus package, we need to invest in our economy. We need to bring home the manufacture of goods such as cars, rail infrastructure, and solar power equipment.
If we do this, local companies will then be in a position to invest in their own businesses, and to strengthen our manufacturing industry from within. Business innovation encourages the creation of strong and lasting new businesses and the creation of new and better jobs, which together support a move to higher living standards. Innovation investment by business is crucial to our ongoing prosperity. [3]
To secure the future of Australian manufacturing and re-pay the debt that COVID-19 will leave in its wake, we need determined action from our Governments, industry leaders, and the general public to put Australia first. We need to foster a sense of social responsibility.
We need Australians to support Australia.
Geoff Crittenden is the CEO of Weld Australia. He joined the company in December 2014 from the Risk Management Institute of Australia. He is a chartered engineer with a diverse background in CEO roles covering not-for-profit, consulting, engineering contracting and healthcare.
He started his career as an engineer in the British Army where he served in Northern Ireland, Cyprus and Germany. Following the fall of the Soviet Union he decided upon a career change and, with his family, immigrated to Australia. His first role was Chief Executive of the Association of Consulting Engineers after which he held leadership positions with Transfield Worley, Cynergy Group, Tianda Pharma and the Risk Management Institute.
