The ambitiously named Future Made in Australia Act was launched last week as a warmup act to the May budget. While the announcement was music to our ears, it felt like the song’s intro was stuck in a loop. Manufacturers like us have heard the same notes before. The National Reconstruction Fund (NRF) was launched 18 months ago, yet nothing appears to have been spent. The simple truth is the government needs to put these words into action and let initiatives like the NRF play out in the market ASAP.
It is possible for Australia to have a thriving manufacturing sector once again. However, every year we delay this manufacturing revival, we see more factories close, more companies leave, and more imported goods arrive. Soon, there won’t be an Australian manufacturing sector left to save.
It’s important to remember that the Australian manufacturing sector has been on its knees for many years, maybe decades. In fact, no other industry in Australia has declined as much as manufacturing over the last 15 years according to Australian Census data.
It didn’t get this way by accident but by design. It became national policy to ship precious materials out of the country for other countries to make things with, rather than doing it ourselves. We also stopped funding manufacturing businesses in earnest. This meant that the brightest minds with the best ideas looked for funding elsewhere – typically the US – or they simply outsourced manufacturing to countries like China.
In that regard, the US is a useful point of comparison. America has been able to successfully reverse the fortunes of its ailing manufacturing sector by introducing smart policies and investing huge sums of money via the Inflation Reduction Act. Industries like EV manufacturing are now thriving in America, and advanced manufacturing startups have been adequately funded to scale up. In turn, they have created jobs, upskilled local workers, refreshed communities, and built high-quality products.
The IRA was cited by the Australian government as an inspiration for the National Reconstruction Fund, but it bears limited resemblance. One has spent billions since its inception and has inspired radical change, the other is yet to spend a cent. I am aware that the NRF has some amazing people involved, and plenty of real-world experience at the helm, but each delay and every passing month will frustrate manufacturing startups waiting for clarity. A year on, before it has achieved anything of note, it has been consolidated into a bigger manufacturing program with an even more ambitious objective – the Future Made In Australia Act. It feels like a sideways step, rather than a forward one.
Looking ahead to the May budget, manufacturing startups are desperate for a clearer timeline for the NRF’s $15 billion funding, and for the money to begin to flow. We also want assurances that the NRF won’t become a cheap bank for big business. Because the NRF model is built on providing a return on investment of just 2-3% above the 5-year Australian government bond rate, there’s a concern that these funds will flow towards the bigger manufacturing firms that would be able to commercialise their technology with or without government funds.
Likewise, there is a risk that the money goes to overseas businesses that view the government grant as a cheap means of setting up shop in Australia. We know from bitter past experience that this doesn’t always last. It would be a huge national shame if the lion’s share of the NRF/FMIA advanced manufacturing funding went to the same names and big brands that hoover up so much government money already.
We need to fund new ideas and new names if we want new results. The NRF should flow towards genuinely innovative manufacturing startups who need the money most, and who will provide the biggest ROI for Australia when they achieve success.
The budget must recognise that Australian manufacturing is at a crossroads. There is a perception that things made in Australia are too expensive. However, advances in manufacturing practices, in areas such as automation and robotics, tilt the scales back in Australia’s favour for complex products. I am not advocating for special protection, but with such fierce global competition, Australian manufacturing startups need a fighting chance to get off the ground.
Other schemes have leveraged private investment alongside government spending to significantly amplify the impact of a scheme like the one proposed. The government dangles this dream, whilst simultaneously making it harder for individuals to make private investments in startups with the proposed changes to the sophisticated investor scheme. Perhaps to complement the NRF, in the budget, the government could reduce taxes or offer PAYG tax credits for startups, offer matched investing with private investors, or give qualified investment credits for high-tech and green manufacturing investments, and government procurement policies could favour locally made products when available.
I believe that the ambition to grow Australian manufacturing should come with a recognition that any Aussie manufacturer will still need an international supply chain, which could be made simpler by reducing duties on raw materials coming back into the country.
Speaking of raw materials, I would also love the budget to address Australia’s dig and ship obsession. Healthy mining and manufacturing sectors should grow side-by-side. We had an opportunity to be a world leader in EV battery manufacturing given our abundance of natural resources, but we let others take our resources and take the lead. I would love to see the Australian government act to align the fates of the mining and manufacturing sectors. We should incentivise miners to sell to Australian manufacturers and disincentivise exports of the most in-demand materials such as lithium if we can use them here instead.
I’ve been branded foolishly patriotic for moving back from the US. The truth is that I want to achieve success in Australia and build things in Australia. I’m confident that manufacturing businesses such as ours can thrive in Australia, but we need much more support for that to happen.
Sam Ringwaldt is the CEO and co-founder of Conry Tech.
