Manufacturing, and advanced manufacturing in particular, has been the topic of many discussions recently both on an industry and political level. COVID-19 has highlighted not only certain vulnerabilities in this area, but has shown great desire by many Australian companies to increase local production, while maintaining healthy trade relationships with overseas partners. On the industry side, these efforts have been consolidated by, amongst others, the Advanced Manufacturing Growth Centre, led by our chairman Dr Jens Goennemann. Latest initiatives include a COVID-19 Manufacturer Response register. Demonstrating the political interest is an address by Hon Karen Andrews MP, who will speak at the Press Club about “Australian manufacturing in a post-COVID world” on May 20.
In our latest edition of the AHK podcast, Sound Bites, I spoke to Dr Michael Zettinig, Director Governmental Affairs & Communications here at the German Chamber, about the future of manufacturing in Australia. You can listen to the podcast here:
Transcript
Ulrike: Today, I will be chatting to Dr Michael Zettinig, Director Governmental Affairs and Communications here at the chamber. Hi Michael, thanks for joining me today. We want to use our podcast series also as a way for our stakeholders to meet, virtually of course, the German-Australian Chamber team. Before we dive into the exciting topic of manufacturing, can you give our listeners a short introduction?
Michael: I have a PhD in Political Science. My master thesis compared the political systems in Germany and Australia, thanks to a research grant by the German Academic Exchange Service. I am passionate about deepening the bilateral relationship and I choose to life in Australia since 2007. Here, I have worked both in the private sector as well as for the Commonwealth government. I joined the German-Australian Chamber team in May 2014, an exciting year where we organised the Chamber reception with (German) Chancellor Dr Angela Merkel in Sydney. In my current role, I am working with the team on projects such as our engagement with the Australia-EU Free Trade Agreement negotiations and macroeconomic developments. Of course, I am also supporting German-Australian companies when they have individual governmental affairs issues and we are working on bringing you new communications initiatives such as our new blog or this new podcast format.
Ulrike: Yes, in which today we will be talking about the Australian manufacturing scene, which has been in the news in recent weeks more than it has been for a while. Can you briefly describe the Australian manufacturing landscape, and how it has changed in the last 10 years?
Michael: In 2007, manufacturing was still 10% of the Australian economy. In 2017, it was 6% and it is even lower now. I think some examples such as the closure of the Australian car manufacturing are well known and they obviously had significant impact not just for Holden and Toyota, but for the complex supply chain, often small and medium-sized businesses. However, at the same time there were of course also Australian manufacturing business that grew in a variety of sectors and several of the car manufacturing supply chain businesses managed to diversify their work and establish themselves in new areas of manufacturing.
Ulrike: We’ve definitely seen quite a dramatic change. What would you say is the biggest difference between Germany and Australia when it comes to manufacturing?
Michael: When you just look at the numbers, the contrast between Australia and Germany is pretty strong. In 2017, Australian manufacturing was around 6% of the economy, in Germany over 20%. Over the last twenty years, the percentage of manufacturing within the GDP of both countries stayed roughly the same in Germany between 20% and 24%, while in Australia it more than halved from over 15% to the current 6%.
Again, it is important to look at the details. A shrinking share of manufacturing on Australia’s GDP has also to do with the fact that other sectors of the Australian economy, for example resources and energy were fast-expanding over that 20-year timeframe. Nevertheless, the difference between both countries is quite strong.
Ulrike: That’s true. At the moment, during this crisis, we’ve also been talking about opportunities. Do you see opportunities for the manufacturing industry here in Australia?
The COVID-19 experience has shown that there are already very capable manufacturers in Australia and that there are good reasons for expanded manufacturing in Australia and I will provide a few example areas in a moment.
Nevertheless I want to emphasise that I am convinced that the future of Australia manufacturing can only lie in Advanced Manufacturing, the high-tech form of manufacturing often also associated with Industry 4.0. This concept, originally developed in Germany, but now implemented in many countries, is much wider than just manufacturing. It includes the areas of skills and training, cyber security, commercialisation of research as much and of course the actual connected manufacturing operation. Therefore, the opportunities are much broader than just on the actual factory floor.
Australia already has a highly skilled workforce and is investing very heavily in physical and digital infrastructure. Therefore, the basis is there for significant growth in Australian manufacturing in a number of sectors.
Ulrike: Can you give us some examples of those sectors?
M: Examples of such sectors, often driven in special precincts, are Western Sydney with the Aerotropolis and the new airport. New South Wales Premier Gladys Berejiklian visited Germany in August 2019 where she signed several MoUs with German partners to develop advanced manufacturing and related businesses such as logistics there.
MedTech, Agribusinesses and defence are three sectors with very strong basics in Australia for further manufacturing.
Other very strong sectors are clean tech and aerospace, where there are also existing research links into manufacturing, for example in Victoria where there is a collaboration with the German Aerospace Centre DLR and local partners including universities and manufacturers.
From a bilateral perspective, the area of hydrogen and particularly green hydrogen, is clearly an area of growth in the wider manufacturing context. It is also of great interest for governments and industry in both countries.
Ulrike: That’s very true. In your opinion, what could this mean specifically for German businesses and their subsidiaries here in Australia?
Michael: For German businesses and their subsidiaries here in Australia, this means there are possibly some short-term challenges coming from the supply chain disruptions that we saw due to COVID-19. For example, there are increased transport and logistics costs in supply chains due to the reduced number of flights into Australia.
But in the medium-term I think there is a great interest in Australia to learn from the German Mittelstand model of successful advanced manufacturing and to adapt it to the Australian context.
This will make it even easier for German businesses in Australia and for innovative Australian businesses to come together to form successful bilateral business partnerships.
At the German-Australian chamber we of course not only support German subsidiaries in Australia, but also innovative Australian businesses interested in Germany. We’re working together with Germany Trade and Invest. We share the office here in Sydney with them. An important organisation that helps Australian businesses when they’re interested in the German market.
Ulrike: That’s really a lot of opportunity for collaboration internally as well which is fantastic. I think there will be some exciting developments.
Industry development is driven by industry first and foremost, but there is quite significant support from Government. Do you feel there is a change in the response from Government here in Australia, either from the Commonwealth level or from the state level when it comes to manufacturing?
Yes indeed I think so. Australian governments on all levels have seen the importance of manufacturing and are increasing their support for a strong Australian advanced manufacturing sector.
As mentioned earlier, there are particular sectors with the highest potential, but support from Australian governments should not be limited to those sectors if there are innovative companies that want to establish advanced manufacturing operations in Australia.
At the same time I want to make another very important point: Australia has greatly benefited from rules-based international trade and investments over the last decades. Therefore, it is essential that support for Australian advanced manufacturing does not block international trade and investment. For example, the Australia-EU Free Trade Agreement is currently under negotiations and it will provide great benefits for both sides, but those negotiations also include greater access for European businesses to Australian government procurement. This will help drive benefits for both sides by developing a competitive manufacturing sector.
I think it is clear: Australian advanced manufacturing has a great future ahead, but only if it is internationally competitive and not in a protectionist environment.
Ulrike: That’s very true, and I’m sure most of our members are really looking forward to the next negotiation round as far as the FTA is concerned, and we’re looking forward to an update from you on this as well. So, the last question: With all these changes happening now, how is the Chamber assisting in this?
Michael: Very important question of course. The entire Chamber team is working with members companies and the German-Australian business community in general in many ways to increase Australian manufacturing and overall to deepen the bilateral relationship. We contribute the topic on the bilateral government to government level, for example at the Australia Germany Joint Economic Committee and in our other government engagement more broadly where we raise manufacturing and everything around Industry 4.0 as key opportunities for this bilateral relationship. Our consulting team, for example, is helping businesses to set up to operate in Australia and, as mentioned, we are sharing the office with our colleague Heiko from Germany Trade and Invest, such an important organisation supporting Australian companies to enter the German market.
And we should not forget we already have fantastic member companies involved in advanced manufacturing here in Australia. It is therefore a focus topic for our events team and for our communication activities as well.
We are working actively with our member companies – some major member companies in this sector include the Advanced Manufacturing Growth Centre managed by our Chairman of the Board, Dr Jens Goennemann, and our Premium Partner the Victorian State government. But of course, we are also delighted to have leading industry companies such as Speed 3D or Titomic as members. They were able to share many insights at some of our previous events, and we are looking forward to working with them in the future to share more insights to make Australian manufacturing a true success story in the years ahead.
Ulrike: Yes, there have been some pretty exciting stories coming from the industry which we’ll continue to share here as well. Thank you so much Michael for joining me today. Manufacturing and advanced manufacturing is a topic where I’d love to do an update in a couple of months or even in a year to see which changes have actually taken place.
Next week, I will be chatting with Brad Welsman from SSI SCHAEFER, who will be giving us an insight into the logistics industry and supply chain challenges.
