Going local first is not a crutch for Australian manufacturing - it's the way forward

Going local first is not a crutch for Australian manufacturing - it's the way forward

Before we had even seen the words 'coronavirus' and 'Australia' in the same sentence, Australia had been experiencing -  albeit quietly - a virtual zero GDP growth per capita for the last 2 years. Slowing from a 2.2 per cent expansion in the previous period and also matching market expectations, it was the weakest growth rate since the third quarter of 2009 - more than a decade ago.

What was the driving force behind this?

The (oft-forgotten) bushfires and drought we experienced in the second half of 2019 were already beginning to have an effect. Then we saw the irony in flash flooding when nature decided to unleash a compete U-turn on us. As a result, living standards were principally flat going into this pandemic. For those of us who were observant, there was already writing on the wall. The COVID-19 pandemic shocked us from the get-go and simply accelerated what was beginning to play out, acting as the primary harbinger to the impending recession we all know is looming.

As an owner and founder of a construction-based manufacturing company myself,  I can't help but look at those statistics with somewhat concerned eyes. After all, manufacturing on average year in and year out represents around 6 per cent of our total GDP - only just pipping agriculture in terms of size.

On paper, and certainly, when compared with other OECD countries, Australia has one of the most underdeveloped manufacturing sectors of any industrial country in the world. In my opinion, across the globe, there is a false belief that if you're a rich, high-wage, industrial country you just don't do manufacturing. It's simply cheaper to do things in Thailand or China or some other low-wage country.

And in part, this stance has elements of truth. Yet, I think it's an ambitious, but very realistic goal to try and refashion our manufacturing sector back to a degree that's comparable to our actual demand for manufacture which was how things were in the 1960s. There is no doubt in my mind our industry could again be a major employer, if it is only just encouraged to grow.

Take a good look at any economically prosperous country in the world in the same ilk of China, Japan or Germany for example and you're looking at countries that have robust and healthy industrialised sectors; you've got countries that are indeed producing at a great level. Now is the time for Australia to instil sound policies making sure that we're buying locally, mandating domestic content requirements to ensure that we're pushing up work and jobs in manufacturing.

Commercial building packages set out in the onset of COVID stimulus packages were calculated to provide 100,000 new jobs with an estimated by-product of $30 billion in economic activity. This opportunity provided local manufacturers of building products with the potential to drive jobs and growth, so long as we were supported by stakeholders and government alike.

When we support Australian manufacturing, projects can benefit from reduced lead times and cheaper shipping, therefore keeping timeframes in line and ensuring deadlines are met. Another aspect is we have the advantage of working in similar time zones (for the most part), meaning communication is much quicker and any complications can be solved; underpinning better production control oversight reiterating the previous points surrounding quality and deadlines.

The government has acted with a somewhat humanitarian disposition around the rollout of ground-breaking support packages which present a generous lifeline. Yet, we have recently seen the household saving to income ratio rise to 5.5 per cent, mirroring a rise in gross disposable income and obvious falls in consumption. People are holding onto what they have - the future isn't certain - and future government spending coupled with stimulus planning needs to take this into account.

This fear factor is nothing new. It was defined as the "paradox of thrift", a theory popularised by British economist Lord John Maynard Keynes almost a century ago, stating that a rise in saving can have the unintended negative impact on aggregate demand, to the detriment of the broader economy. 

Sure, periods of recession and recovery are relatively normalised and if you look at the US economy, they have themselves been through 22 full cycles since 1900. But this pandemic is new ground, the world has changed, and we cannot rely on previous data and analysing old trends to predict a safe way out of this. We managed to steer ourselves through a lucky escape.

Small local businesses need every customer they can get at the moment. The Federal Government's 'Go Local First' campaign bravely aimed to support small businesses during the onset of the pandemic, meaning there was a better chance your favourite café, florist or marketing agency would survive the past year.

Fast-forward to a year since 'Go Local' first rolled out across social media, the Australian Made Campaign Week continues to drive the same message home to buyers to support local manufacturing. AMCL is encouraging consumers to consider the flow-on effects of their purchasing decisions to support our local economy first.

With a focus on 'Australian Made' let's not be blinded by the fact some companies produce locally but send their profits off-shore. At Safetyline Jalousie, we are proudly Australian made and Australian owned.

Thank you to everyone who currently supports home-grown, locally made and owned businesses. We wouldn't be here without you! #AustralianMade #AustralianMadeWeek

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