Unlocking the Global Green Economy
What Australia needs is a coordinated national industrial policy that supports specialized niche manufacturing.
These policies would fuel an ecosystem of industries and sectors focused on emissions reduction and skills development. It would help Australia take its place in the booming global ‘green’ tech economy.
For example, policies that cleverly target gaps in national and international supply chains could support the expansion of renewable energy technology manufacturing.
This focused approach requires that manufacturing policies be developed in line with education, energy, mining, research and development, and emissions reduction policies.
When done right, international evidence shows that tailored support for niche industries can be very successful.
Germany, for example, has a coordinated policy that emphasizes technical capabilities, generous funding for research and development, and the decarbonization of the energy sector. This approach supports the production of high-end vehicles.
Switzerland specializes in luxury consumer goods, precision instruments and food. In Denmark, the policy focus has been on high-quality consumer and industrial products – from bespoke furniture to aircraft – for international markets.
Australia can’t do everything. But promoting environmentally and socially responsible industries is a good start. It would also help attract investment by underpinning economic security in relation to Australia’s energy future.
What can governments do to help?
Direct financial benefits to manufacturers certainly help if they require manufacturers to stay ashore.
The federal government could also offer tax-related “carrots and sticks” that would require foreign-owned companies to set up manufacturing facilities in Australia to avoid tariffs.
Government procurement policies that favor local manufacturing more openly can also be effective, given the influential size of state and federal governments as consumers themselves. Opting for foreign-made tenders like Sydney’s cracked light rail sets can prove very expensive in the long run.
When governments commit to onshore production, Australia can produce excellent products that meet international demand. Take, for example, the Bushmaster armored vehicles manufactured by Thales Australia in Bendigo and requested by Ukraine. Thales spent $1.9 billion on Australian suppliers between 2018 and 2020, generating a significant local return on government spending.
For employers in the manufacturing industry, the shortage of skilled workers can hinder expansion.
As I argue in my book Industrial Craft in Australia, Australia can learn from countries that place long-term technical education at the heart of their industrial policies.
In German vocational training, for example, employers’ associations, trade unions and works councils work together with a publicly funded training system. This produces a highly qualified workforce with scientific and technical knowledge.
At the very least, Australia could do more to directly support taking in apprentices and pay 50 per cent of their wages. This must be done alongside significant reinvestment in TAFE rather than supporting unreliable private training providers.
Electrical Possibilities for Australia
Two examples show what is possible: electric vehicles (EVs) and solar batteries.
The conventional wisdom is that Australian car manufacturing is ‘dead’. However, recent research published by the Carmichael Center and Per Capita suggests that manufacturing EVs and/or EV components remains viable, particularly as local demand for EVs outstrips supply.
Much of Australia’s existing car manufacturing infrastructure lies unused and could be reconfigured for component manufacturing and assembly.
In solar batteries, Australia could benefit from increasing global demand for battery storage for renewable energy.
Australia has its own reserves of lithium and zinc – important battery components. So it makes more sense to upgrade our natural resources than to ship raw materials abroad and buy back batteries produced abroad at inflated prices.
Very few companies currently manufacture solar batteries entirely in Australia.
An exception is sonnen, which is based in an old Holden factory in South Australia. Sonnen is now owned by Shell – even fossil fuel giants can see where the global industry is going.
How can we afford all this?
Australian taxpayers subsidized the fossil fuel sector with US$11.6 billion in 2021-2022. The Morrison government just pledged $250 million to oil refiners.
The extraction of fossil fuels has serious consequences for the climate. But it’s also worth asking whether it makes sense to heavily subsidize low-value-added extractive industries.
Australia can afford to transform manufacturing into an economically viable, environmentally responsible and job-creating sector. For this we need a strategic and long-term approach.
Jesse Adams Stein is Senior Lecturer and ARC DECRA Fellow at the School of Design, University of Technology, Sydney. This article was republished by The Conversation under a Creative Commons license. Read the original article here.