Friday, August 17, 2012

What does the manufacturers' task force want? Lots

THE Gillard government now faces a host of tough budgetary and policy choices after its manufacturing task force urged it to cut business taxes, reduce "the impacts of the carbon price", and lift spending on infrastructure, skills and a range of other areas.

The task force, mostly of business and union leaders, warned that since 2008, the high dollar has cost 110,000 manufacturing jobs, 10 per cent of its workforce and 85,000 more are at risk.

With the dollar likely to stay high, the report said, the challenge is to create an economic environment and workplace culture that will make manufacturing more internationally competitive.

"This requires a business environment that supports continual innovation in products, processes and management," they said. But their 41 recommendations show this will not be cheap.

With manufacturing output 8 per cent below 2008 levels, they urge the government to bring forward infrastructure investment, buy more local content, create a housing recovery, and step up spending on small business and skills training.

The report proposes:

. A government-led effort to win Australian companies a bigger share of supply contracts for the $470 billion of mining-related investment in the pipeline, rather than see most of it go to imports.

. Bringing research institutes and industry together in "smarter Australia precincts", like Melbourne's Parkville medical precinct, so more of Australia's research expertise is directed towards making new products or improving them.

. Building on Australia's strengths by processing raw materials before export, especially processed food for Asia's markets.

. Developing more global niches in knowledge-intensive manufacturing, as Futuris has done in automotive interiors and CSL in plasma.

. Monitoring the impact of the carbon tax on emission-intensive industries, and ensuring it is "refined as needed" to keep firms globally competitive.

Prime Minister Julia Gillard said the government supports most of the report in principle, but shied away from committing to its spending proposals, saying they would be considered in the budget process.

She said the government's manufacturing support arms will combine to help Australian manufacturers bid for contracts in infrastructure and resource projects. It will also set up a "manufacturing leaders group" bringing employers, unions and government together.

"I want to make sure that we still have a strong manufacturing sector beyond the resources boom," she said. "Manufacturing provides us with a skill base, with innovation, and it provides working people with jobs."

Australian Industry Group CEO Innes Willox said Australian manufacturing needs to build on its strengths, improve its partnership with public sector research, become part of global supply chains and build a culture in which small manufacturers can grow big.

Mr Willox said manufacturing's biggest problem was the high dollar, quipping: "The dollar is number one, and it's about four games clear on top of the ladder." But industry must lift its productivity to become globally competitive even with a high dollar.