Why does Australia get into silly, dead-end arguments about manufacturing? Especially about big shiny things or new technologies? We all know we’re not good at it, don’t have a big enough market, and just can’t compete with the likes of the United States, China, Japan, South Korea or much of Europe.
Cars, trucks, computers, fast trains, slow trains and ships are just some of the harebrained ideas put forward by politicians, unions and the urgers and coat-tuggers in business who can sense a government handout or free million in “research and development”.
On Wednesday it was the prime minister’s turn. Anthony Albanese waxed lyrical at the National Press Club about batteries, renewables and manufacturing.
“We need to not just dig it up. I want to make sure we use the lithium and nickel and other products we have to make batteries here,” Albanese told the assemblage of hacks, real estate agents, lobbyists and political lurk merchants.
“That’s part of the vision of protecting our national economy going forward. I think we should be making solar panels here. I think we should be making so many more things here in order to protect our national sovereignty.”
Albanese sought to assure Australians he was acting to shore up national security and that this was linked to economic security and the sovereignty of local manufacturing. He wanted to put public money into projects that could expand local manufacturing and recover from the loss of the big carmakers over the past decade.
But this is nonsense, the stuff of fairy tales and the likes of Rex Connor and Barnaby Joyce. We have heard for decades about building an export steel industry in the Pilbara where the iron ore and energy are, or in the east where the coking coal is found.
It always sounds great until hard-nosed analysts ask why anybody would want to buy steel from Australia when it has to be shipped thousands of kilometres (and emit huge amounts of carbon along the way) to users in China, Japan, Taiwan, South Korea, Vietnam and India who would not buy it because they can use their own iron ore, or import Australian iron ore and sell us steel in return.
We have some experience in making steel and have the right mix of commodities to do so, but how can Australia make batteries here and ship them to China, Japan, the US, Europe and South Korea when those countries all have giant carmakers and electric vehicle makers?
Carmakers in those countries will not need Australian batteries; nor will they need Australian technology. They are doing the development and getting money from their governments, and are starting to cooperate with each other.
It doesn’t make sense to ship an Australian-made battery to China or Japan only to ship it back in the imported vehicle. Sure you could import the part-finished vehicle and install the local battery here but what would that do to warranties and sales? And how would you move it on and off the shop and to the dealer without having a battery installed?
One deal in the US last week shows you the futility of Albanese’s idea. Ford, the big US carmaker, has asked Chinese electric vehicle battery giant Contemporary Amperex Technology (CATL) to help build batteries in the US for some of Ford’s new range of EVs.
CATL will provide preparatory and operational services for Ford’s battery plant in Michigan as well as license its patented battery technology. This business model combines CATL-licensed technology with processing at Ford’s own plants, most likely lithium iron phosphate (LFP) plants.
No matter how much money the Australian government offers (A$25 billion in the last budget), we just can’t compete with countries like the US when it comes to financing EVs and renewables.
US President Joe Biden’s Inflation Reduction Act is already reshaping the global renewables and EV sectors with its huge pot of money. The billions that the Eurozone, Japan and South Korea are trying to find to compete with the US will add further pressure on small wannabe players like Australia.
A handful of Australian companies have taken up US government aid under other assistance programs to produce new technology in America. Rare earths company Lynas is one with US loans; Graphite miner Syrah is another.
A smarter idea would be to finance chargers and EV battery recyclers. These companies are starting out, though the Brisbane-based charging maker Tritium has already bolted to the US where it will build 30,000 of its charging stations a year to be installed across that country and in Europe.
We make the bionic ear – Australia can do more if we’re smart. Why just dig/pump when we can add value (with less weight) and ship a finished product?
We could make batteries here – but if we want to send off lithium and buy it back at a higher cost, then let us remain the dumb country. Bit like buying our own gas back and ripping off the public.
We seem destined to just making bad financial decisions over and over again – Defence procurement is a ongoing major failure in selecting unfit for purpose.
The bionic ear was partly designed here and while the prototypes and early models may have been made here, they are no longer manufactured in Australia.
True. But that’s part of the problem we need to fix. We do have some impressive technical capabilities (though we starve them of resources).
And on the rare occasions when we do produce something technically innovative, we let it get flogged off to some foreign oligarchs.
And as for Government run research institutions – pretty much all flogged off (look what happened to CSL).
We cannot compete on scale which impacts cost. The reason that everything is made overseas is down to cost per unit which is driven by scale. You need scale to enter overseas markets which are vital as our tiny population simply cannot support the level of scale required to bring the cost per unit down to a competitive level.
While you may be prepared and able to buy “Australian Made” most ordinary people cannot.
If that was true no country other than the most populous could make anything.
But that’s not the case. Just walk around your house and see how many things are not made in China, India, Brazil, Indonesia or Japan.
Who makes the best dishwasher? Vacuum? Jet engine? Pepper mill? Oil filter? BMX tyre? Silk necktie? Dogs collar? Sub-woofer? Condom? Salad spinner? Centrifuge? CRM software? Games?
Pretty much everything is made in China, India, Brazil, Indonesia or Japan if you look at the labels. If you actually do some research you will find that most items “made” in places like Germany and Switzerland, for example, are really just “assembled”, not made.
The “best” is subjective and the examples that you provide are misleading. No single country, outside of China, makes every component of everything they make (and they also import raw materials). German cars use Chinese and Japanese electronics and gearboxes, Swiss watches are Swiss in name only etc etc.
All of that is done for a reason. Cost.
Most Australians simply could not afford to purchase most “Australian Made” items due to our high costs here.
What if hostilities were to break out between the US and China? And we need to rapidly expand our military from 50k to 500k personnel, and eqiup them with uniforms, boots, socks, singlets and underpants? Armies actually need that stuff. And lots of it. It doesn’t matter how many nuclear submarines we purchase, if we can’t clothe our soldiers and sailors with locally made uniforms, we’re defeated before the first shot is fired. ?
The following seems to indicate that a lot of production is still here:
https://www.business.nsw.gov.au/industry-sectors/industry-opportunities/medtech/success-stories/cochlear
You missed this part.
“In July 2017, Cochlear expanded its manufacturing footprint into China and emerging markets, announcing plans to build a new $50 million facility. It is expected to commence production within four years and will have the capacity to increase global cochlear implant production by around 50%. Cochlear also acquired Sycle, the global leader in audiology practice management software.”
We have already contracted out our defense to overseas companies – USA in particular. Why not just sell the lot and become a quarry?
We already have, come to WA and see the actual quarryscape.
Good example of how much modern manufacturing does not match Australian ‘culture’ that is pushed, making ‘big’ mechanical things for political optics; often targeting of ‘tradies’ and ‘workers’, often retired, by the LNP.
Reality is that our working age has passed the demographic sweet spot, much assembly line manufacturing can be done offshore, no ‘unskilled’ work, the likes of Cochlear & CSL invest in research for high ROEs which many local public companies do not and simple shovel out dividends….
Further, much higher end and higher value manufacturing is based on research, specialised components, services and global supply chains, neither autarky nor closed economies.
Good example of how much modern manufacturing does not match Australian ‘culture’ that is pushed, making ‘big’ mechanical things for political optics; often targeting of ‘tradies’ and ‘workers’, often retired, by the LNP.
Further, much higher end and higher value manufacturing is based on research, specialised components, services and global supply chains, neither autarky nor closed economies.
Reality is that our working age has passed the demographic sweet spot, hence, not about finding unskilled employment, much assembly line manufacturing can be done offshore, no ‘unskilled’ work, the likes of Cochlear & CSL invest in research for high ROEs which many local public companies do not and simple shovel out dividends….
I think your argument is broadly right, but needn’t be. If Australia has the capacity to be a renewable energy superpower – which it does – and energy costs would be lower here than anywhere else – which they could be, then shipping iron ore to Japan or anywhere shouldn’t make sense. New competitive advantages can be created from the advantages we have. Alas, it seems the willingness and the imagination to do so just isn’t there. Has Australia really changed so little since Donald Horne wrote the The Lucky Country?
This is a forward looking, positive observation from P79, who was not lulled into assuming fossil fuels are a given. Times change, and with change comes opportunity.
In addition, note that “Australia” isn’t monolithic. It is 30 million individuals and hundreds of industries selling to thousands of different markets.
Some industries selling to some markets have compelling reasons to manufacture in Australia. Others don’t.
With the right support structures ie capital, labour, transport, and bureaucracy, we will see success stories.
Keep an open mind and watch this space.
Agree regarding the opportunity and need to use these advantages. One additional global force is the USA “Inflation Reduction Act” which does many things including making manufacturing within the USA extremely attractive. But we still have that capacity in northern AU especially.
This issue warrants far more analysis than this effort. Of course Australia can’t compete in many areas of mass production, but there are new factors emerging that change the dynamics of “competitive advantage” and “comparative advantage”. As Pinanfarina indicates below, the super-low energy costs from giga-scale solar and wind farms changes to economics of shipping iron ore, which is 50% oxygen and carbon to China, Korea and Japan, just because they have economies of scale to fit high energy prices. On the mass-manufacturing level, there are also many new factors, not the least is “resilience” – the ability to respond to shocks in a timely and productive way. Vaccines and face masks are two simple examples. It is worth paying a premium for some things that enable resilience – cheap face masks from China are useless if you can’t get them in time to stop a pandemic. Robotic manufacturing is also changing the basic economics – no – there an’t millions of Uyghurs in Western China making solar panels under slave conditions- – there are a few techos managing super-clean super-automated factories. Even if our automated factories doubled the price of solar electricity, it would still be cheaper to smelt iron in the Pilbara than ship it the ore to Asia. I could go on, and talk about the “resource curse” issue (look it up in Wikipedia!).
C’mon Glen, you’re much better than this outdated trivia!
Today’s item is an infuriating read. I don’t understand why so many purveyors of influence in Australia’s polity are so defeatist. All they do is yell from the sidelines that it can’t be done. Is it still 1932?
It’s a great example of recycling though. It’s at least annual.
Nope, its damned near 1938.
And that’s a worry. 😉
Another rendering on the ancient chorus on Antipodean Industrial Incompetence. This song has always been sung most fervently by those whose emotional, cultural, and most importantly economic loyalties are in thrall to the metropolitan centres of capital – none of which are located in this southern continent. It suits, and has always suited the metropolis, that we remain an economic dependency. It does not suit the interests of the metropolis that we develop indigenous industrial capabilities. It never has – with the brief exception of WW2 where we ended up as a major logistical resource for the US military in the Pacific. Neither does it suit the interests of the local financialised economy and its dependents, many of whom are to be found inhabiting parliamentary seats or chanting F.I.R.E sector prayers in the thinktanks and the media.
People get so used to singing Antipodea Incompetentia – and reciting the accompanying sacraments to financial capitalism, that it becomes unquestioned wisdom. It’s not wisdom. It’s an ideology. Moreover, it is an ideology that is demonstrably a catastrophic failure.
Thanks Griselda, far more eloquently put than my effort.
We are a commodity exporting third world country with a first world urban lifestyle. When we did have a lot of manufacturing it was protected and the products were shoddy.
We never developed niche capabilities or design excellence. Yet over the past 40 years we’ve watched multiple Asian countries build their manufacturing, design and hi tech sectors up from scratch while we dug holes and indulged property developers.
We’ve debased our tertiary education sector on the racist assumption that the national universities of foreign students would never catch up.
Always Australian “Vision” is of short term gain not long term investment or goals. Australia used to be a cultural desert. That changed but we’ve never supported innovation or research.
I guess we’ll be hearing “we can’t compete” as other parts of the world build local capabilities from scratch – in another 20 years we can complain about Ghana or Brazil or Nigeria or probably New Zealand.
Harsh but true.
https://atlas.cid.harvard.edu/rankings
aren’t we Aussie consumers such a bunch of thoughtless purchasers! But, then again, I suspect we’ve taken a supermarket chain’s price promotions (downwards) to heart and applied it to all purchases (services and goods). Yep! serves us right for being so thoughtless.
Often, I would mention to customers that I didn’t operate (my professional practice) under supermarket standards, therefore, what was paid to the practice would stay in Aus. The looks of dawning enlightenment were both delightful and sad.
Yes, it serves us right if manufacturing is sourced from overseas!!!