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Sutherland ShireBiz Advanced Manufacturing Forum

16 October 2014

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Thank your for inviting me to be here today.

I’d like to say congratulations to ShireBiz and the Southern Strength Agile Manufacturing Network for your initiative in offering this advanced manufacturing forum. Australia is a very lucky country and for many years has been riding the wave of success the mining boom has provided us. The Coalition went to the election realising that this won’t last forever, so took action and from day one aimed to deliver industry from uncertainty Labor brought and pave out Australia’s next stage of industrial growth.

This morning I want to start by talking about the economy and the task ahead to ensure that Australia’s unbroken 23 successive years of economic growth continues. I will then give you an overview of the one of the most important announcements made by this government, earlier this week.  The Industry Innovation Competitiveness Agenda is the Government’s plan to provide a competitive environment that allows businesses to create the jobs needed for strong, secure communities. As the business-focused element of the Economic Action Strategy, the Competitiveness Agenda brings together and builds on the Government’s economic reform efforts to make the most of Australia’s strengths and business opportunities. To finish I’ll look at some Australian Government initiatives that will be of interest to you as you look to establish your Advanced Manufacturing Business Centre in the shire. In the June quarter 2014, Australia’s GDP was $396.5 billion and grew by 3.1 per cent in through-the-year terms.

And while manufacturing may have slipped down the top 10 in terms of significant industry contributions to GDP, it is still vital to our on-going prosperity. Earlier this week, the Prime Minister and Minister Macfarlane, announced this blueprint through the Government’s Industry Innovation and Competitiveness Agenda. Over the past 10 months the Government has been working tirelessly with industry heads and business to identify our next growth sectors, and to ensure Government gets out of the way and let industry do what it does best, innovate and lead us down the path to prosperity.  I am here today to tell you this government is committed to Improving Australia’s competitiveness and building the stronger economy, which is something that we all want. The Government has four overarching ambitions to realise the Government’s economic vision:

Firstly - to enable a lower cost, business friendly environment with less regulation, lower taxes and more competitive markets.  The Government will make it easier and cheaper to do business, by reducing the burden of regulation, and of taxation, and improving access to high-quality, low-cost inputs to business by opening the economy to greater domestic and international competition.

Our second ambition is to create a more skilled labour force. The Government will increase the skills of our workforce to better prepare for the jobs and industries of the future, by improving the education and training systems, attracting the best and brightest to Australia, returning our workplace relations system to the sensible centre, and helping parents stay in the workforce.

Our third ambition is to create better economic infrastructure. The Government is increasing public investment and encouraging greater private investment in infrastructure, and improving infrastructure project selection, funding, financing and delivery and use. Our fourth ambition is to create Industry policy that fosters innovation and entrepreneurship.

The Government is refocusing industry policy to drive innovation and entrepreneurship, not dependence on government handouts and protection. Industry policies will be re-targeted to capitalise on Australia’s strengths and accelerate the growth prospects of our high-potential small and medium sized enterprises and most promising sectors. We will consult with industry and researchers on a plan to focus the Government’s $9.2 billion per year investment to get a better commercial return. But visions can’t become reality unless you’ve a plan proposing a clear set of outcomes. On Tuesday, the Prime Minister and Minister Macfarlane gave Australia in detail of how that would be achieved.  Let me run over that again. The Coalition has announced six major reforms to lift competitiveness and we have begun taking action now.

Firstly, the government will encourage employee share ownership. We are making employee share schemes more attractive for start-ups and business generally by delaying the point that employees become liable for tax, and allowing a tax exemption when shares are provided at a small discount by eligible small companies. The cost is about $200 million over the forward estimates.

Secondly, the government will establish five Industry Growth Centres. We are creating Growth Centres, initially for five promising industries, to drive growth and job creation at a cost of $188.5 million over the forward estimates. We plan for the first five Centres to be in:

  • food and agribusiness;
  • mining equipment, technology and services;
  • oil, gas and energy resources;
  • medical technologies and pharmaceuticals; and
  • advanced manufacturing.

Thirdly, the government is reforming the vocational education and training sector. For too many years, training has been done for training’s sake and industry has been left with trained staff who don not meet their needs. To address this, the Government will focus the VET system on meeting industry needs, including by:

  • refocusing the delivery of apprenticeship support services on improving participation and completion rates, with funding of $200 million per year;
  • launching two pilot programmes, at a cost of $44 million, through the youth stream of the Industry Skills Fund to assist in the training and employment of young people in regional Australia and areas of identified higher levels of youth unemployment or disengagement;
  • continuing to streamline the VET system’s governance and advisory arrangements; and
  • continuing to work with the States and Territories on system improvements, including a possible refocusing of VET in schools and school-based apprenticeships.

Fourthly, the Government will better promote science, technology, engineering and mathematics in schools. Education is a key component to ensuring Australia’s future prosperity. The nation is falling behind other countries, so this government is committed to refocussing our students.  As part of the Competitiveness Agenda, the Government is providing additional support to foster school students’ interest and competency in science, technology, engineering and mathematics (STEM). This will better equip students with job-relevant skills and by provides an additional $12 million to:

  • assist to develop and implement innovative online curriculum resources in mathematics;
  • enhance computer programming skills across the curriculum;
  • provide seed funding to pilot an innovation-focused ‘P-TECH’ styled secondary education initiative; and
  • increase student participation in ‘Summer schools for STEM students’.

Fifthly, the Government will enhance the 457 visa and investor visa programmes. 457 visa is not a bad word if skilled migrants help us fill a growth sector that has skills shortages. But it has to be monitored properly and the Government is keen to get this balance right. The Government will improve business access to 457 visas for skilled migrants, while improving programme integrity, to ensure that sponsored workers on 457 visas are a supplement to, and not a substitute for, the local workforce. The Government will improve the Significant Investor visa programme, including by involving Austrade in the process of determining eligible complying investments; aligning qualifying investments with Australia’s five investment priorities; and introducing a premium stream for people investing more than $15 million.

And finally, the government will accept trusted international standards and risk assessments for certain product approvals. Red tape reduction is essential and one way we can do this is to start adopting trusted international standards, instead of always attempting to develop our own. The Government will adopt the principle that if a system, service or product has been approved under a trusted international standard or risk assessment, Australian regulators should not impose any additional requirements unless it can be demonstrated that there is good reason to do so. The Prime Minister and Minister Macfarlane also announced, we wouldn’t be stopping there. Further reforms to promote the Competitiveness Agenda’s four ambitions will be developed over the longer term, drawing on further consultation with business and lessons from the implementation of the initial measures. The Government will commence a series of stakeholder roundtables on the Competitiveness Agenda over the coming months. I encourage everyone in this room to have their say through their industry group.

With this plan, I expect there will be changes to our manufacturing sector and innovative people like yourselves will lead the charge. While the top three contributions to GDP come from mining (10.4 per cent), financial and insurance services (8.2 per cent) and construction (7.6 per cent), manufacturing nonetheless produces around 6.5 per cent.

Twenty years ago, the manufacturing sector’s share of GDP was 10.4 per cent.  Manufactured goods comprise around a third of total exports and are worth around $90.4 billion a year. And the sector employs just under a million people a year, or around 8 per cent of the total. For some considerable time, manufacturing has faced significant challenges. These include a lack of economies of scale from operating in a small domestic market, intense international competition, low productivity and a high Australian dollar. It’s also been a part of the structural change that has been a fact of life in the Australian economy.

The trend saw a gradual decline in agricultural sector employment initially, and this is now occurring in manufacturing. The decline in the relative contribution of manufacturing employment over the years is part of a global trend that is common to developed economies. At the same time as employment in manufacturing has eased, jobs in the services sector have grown by around 1.7 million. It’s interesting to look at the ABS data for the Sutherland Shire to see how this trend has been reflected here. By far, between the 2006 and 2011 censuses the manufacturing sector has had the largest decline in employment among the Shire’s people. Over the same period, the cumulative growth in the combined services sector has comfortably offset this.

In 2011, 1309 more Shire citizens were employed in the health care and social assistance statistical category alone than in 2006. The number of Shire people working in manufacturing dropped 1,212 during the same period. But while structural change is inevitable, this doesn’t mean that we should be turning our backs on manufacturing. Manufacturing adds diversity and depth to economic activities and builds economic resilience to global and domestic economic change. It is a major contributor to business research and development with $4.5 million spent on R&D in 2011-12 representing 24.4 per cent of total business R&D. In fact, the multipliers from manufacturing extend across the economy into the services sector, for example. That’s a little of the macro and micro-economic picture.

Similarly, the government wants to concentrate its push for growth in target sectors like advanced manufacturing, where our firms have already demonstrated their ability to compete with the world’s best. To see the potential for success we need not look beyond the Shire’s boundaries. The next speaker Steve Britton, the managing director of Britton Marine. A company that has carved out a niche for itself in a very competitive market place by specialising in design, manufacturing and maintaining military, law enforcement and commercial craft.

Britton Marine is obviously succeeding because their boats are demanded by the Australian, Singapore, Indonesian and New Zealand navies, by both state and federal police, not to mention customs agencies in Australia, by the Royal Solomon Islands Police and the US military. The simple fact is that the opportunities are available; it requires a little perseverance, ingenuity, a focus on customer service and, I’m sure Steve will tell you, a lot of hard work. Paul Degan, Chairman of Enware, and a number of Enware’s staff, are also in the audience today. Enware is a local company that makes specialist plumbing solutions for commercial and domestic users that save energy and water. They have been operating for 75 years and have remained in tune with the market for a wide range of smart plumbing fittings that meet today’s customers’ demands and compete on value rather than price. Enware’s products are sold in the highly competitive markets of Dubai, Singapore and the United Kingdom, as well as Australia. Part of Enware’s success is down to the firm’s leadership in mobilising the creativity and ideas of its staff to keep the firm competitive.

Take also the example of Melbourne’s Marand Engineering.  Marand has grown enormously since it started as a one-person tool making business in 1969. It’s still privately-owned but it has international clients, employs 260 people and has a forecast turnover of $84 million in 2014. True to its roots, it supplies high-quality precision tooling, machine tools and highly engineered automated production solutions across the spectrum from automotive, aerospace, defence, white goods, rail, aviation, mining, food processing and general manufacturing. It was named Manufacturing Monthly’s Endeavour Awards Manufacturer of the Year this year for its long-sighted investment in a complex international manufacturing project. The award judges said Marand made the investment: ‘with the full knowledge that profits would not flow through for a very long time.’ Marand recently delivered the first vertical tails for the Joint Strike Fighter.

All of these companies have prospered by playing to their strengths. They have shown how drawing together the skills of a multi-disciplinary team using advanced technologies can engage with customers’ needs to provide solutions with innovative products and services. The market in which they are competing all have low volumes but require quick response, cost-competitiveness and excellent after-sales support.

The government’s focus is on fostering more of these sorts of companies to boost growth, create new jobs, attract new investment and make Australian industry more competitive. Last week in Melbourne, I opened Objective 3D, Australia's first commercial scale 3D printing business.  Objective 3D will fill a niche market in low volume high, value manufacturing and so will local Wollongong 3D printing company Cammpro 3D printing also answers one of of my long held questions, how much IP, unique designs and innovations have never been brought to commercialisation because the costs of manufacture for the proving concept has been too expensive.  Now in less than a day, the design can go from the electronic drawing board to plastic reality for literally just hundreds , not thousands or millions of dollars. This my friends this is the way of the future, innovation, design, IP and first of line development.

We will never be competitive in the mass produced widget market, so we need to develop new and innovative widgets and then be first to market with them before the rest of the world catches on. The opportunities are endless, with not only plastics printing, but now metals such as titanium making specialised, intricate small and very high value turbine parts for example and then there is the work being done on human cell 3d printing, in particular the research on printing skin and heart valves, using your own unique DNA cell structures. Now it is true that the machines may be made offshore, but it is the design and IP that makes Australia unique and quite often the world leader in many fields. Were working to encourage that creative spark, strengthening Australia's innovation, and competitiveness is the key to our future prosperity

This technology provides the opportunity to capitalise on these breakthroughs in innovation, so therefore in line with this our priorities for improving industry competitiveness are:

  • skills development;
  • better targeted science and research;
  • attracting investment in industry; and
  • reducing red tape.

We are progressing a range of measures to ease pressures and costs on our industries. These include abolishing the carbon tax, cutting red tape costs for business, and very importantly, building our export base. We know that having skilled workers will help drive innovation and productivity in the workplace. Skilling our entrepreneurs will mean we make better use of the opportunities presented by research and new markets. Nationally, the newly formed Council of Australian Governments’ Industry and Skills Council is about ensuring industry has the workforce skills and operating environment for boosting national productivity and competitiveness.

Complimenting the agenda is the recent redesign of our government service delivery to industry by ‘streamlining’ and ‘simplifying’ our operations to be more ‘business friendly’ and reduce costs to business. We have replaced a confusing and conflicting array of industry support programmes with the new $484.2 million Entrepreneurs’ Infrastructure Programme. This has three main streams.

I talked earlier about the need to build the entrepreneurial talents of our business managers, particularly in small and medium enterprises. Well, in the first of the streams under the Entrepreneurs’ Infrastructure Programme, a business management stream, will help chief executives and managers to develop business improvement plans. Australian business has the lowest record of engagement between businesses and researchers and research institutions in the OECD, so the research connections stream will enable mid-sized firms to link with research organisations for specific projects to re-engineer business operations, help solve business problems and develop new ideas with commercial potential.

Third, a commercialising ideas stream will include tailored services that will help entrepreneurs and innovative firms to enhance their prospects for commercial success. The Entrepreneurs’ Infrastructure Programme and the Industry Skills Programme will both target advanced manufacturing and services as a priority, including defence and aerospace, mining equipment, technology and services; and health and biomedical products. In addition to these two initiatives, the $50 million Manufacturing Transition Programme will provide assistance for Australian manufacturers wanting to undertake capital investment projects to support their expansion or transition into higher value or knowledge-based manufacturing.

Applications opened for the first round of grants last month and close on 24 October.

The programme will help firms to build capability and improve their ability to compete in international growth areas, creating high skill jobs for Australian workers.  At the same time it will improve their profitability and sustainability.

Under our new streamlined way of doing business with business, you can get more information on these grants programs from the Single Business Service on business.gov.au. The Single Business Service is the first point of contact to access information and referral services to improve business sustainability. It can be accessed by through the business.gov.au portal or contacted by email, web chat or phone.

Friends, I have talked about a new direction for industry policy. We know that government handouts won’t make Australia’s industry sectors internationally competitive. The days of giving money to struggling firms or firms that will not be viable in the longer run are over. The new Industry Innovation and Competiveness makes our future direction clear. We will focus on Australia’s strengths and not prop up poor performers.

Our new programs are about ensuring that those manufacturers that are enjoying the economies of scale of being in global supply chains, or are selling high value products, are empowered to make the right decisions to maintain their competitiveness in these times of intense international competition. And they are about creating opportunity for entrepreneurs and innovators by making the right connections and then staying out of their way and letting them get on with the job.

I understand that one of the motivating forces behind today’s forum is to advance the establishment of an advanced manufacturing business centre in Sutherland. This is a wonderful initiative; it shows an enormous sense of commitment that sits squarely on the page with our national agenda. The use of business incubator structures such as clusters of complementary businesses all collaborating towards a common purpose is a recipe for success. I congratulate you on the formation of Shirebiz and I look forward to, sometime in the not too distant future, returning to the Shire to see the progress you have made.

Media contacts: Mr Baldwin's Office 02 6277 4200