REBUILDING AUSTRALIA: SEIZING OUR CHANCE TO MAKE THINGS IN A POST-COVID WORLD

On Tuesday 16 March 2021, Daniel Walton, AWU National Secretary gave an address to The Sydney Institute, filmed for Youtube, in which he set out a vision for Australian manufacturing in an era of new green energy and global, climate change transformation of energy uses. Taking his cue from the innovative government support through such policies as JobKeeper in a time of pandemic, Daniel Walton threw down the challenge to the prime minister to find similar innovation to revive Australian manufacturing.

REBUILDING AUSTRALIA: SEIZING OUR CHANCE TO MAKE THINGS IN A POST-COVID WORLD

DANIEL WALTON

Firstly, I want to acknowledge the Traditional Owners of the Country on which we meet today, the Gadigal people of the Eora nation, and recognise their continuing connection to land, waters and culture. We pay our respects to their Elders past, present and emerging.

Thank you for inviting me to address the prestigious Sydney Institute. I’ve had the great honour of leading the Australian Workers’ Union for the past five of its 135 years. Like most of my predecessors, I have proudly represented thousands of members in the Australian manufacturing sector. Unlike most of my predecessors, I’ve done so in the era of social media.

Every time we secure a result in bargaining for our member in manufacturing, we’ll share it on Facebook and other platforms. The reaction we get is overwhelmingly positive. Most of the comments are welcoming and congratulatory. But I’ve also noticed something.

There will always be someone who pops up in the comment section to say something like:

“Classic unions. Driving up wages so we price ourselves out of global competition in manufacturing.” You can set your watch by it.

Now as far as I can tell these people aren’t generally trolls. And they’re not Liberal Party staffers with fake accounts. They seem to be real people, representing sincerely held views.

They are people who have internalised a consistent business lobby talking point of the past 30 years – that the decline of Australian manufacturing is inevitable because Australians cost too much. They’ve swallowed the idea that the very concept of well-paid blue collar workers… is fundamentally incompatible with profitable manufacturing.

According to this view a successful manufacturing sector necessitates Chinese Foxconn sweatshop nightmares. And unless we’re willing to cop that – we may as well resign ourselves to a manufacturing sector slowly dwindling to zero.

Sure, a union like ours might secure some good deals for some sites here and there. But they can only by pyrrhic victories. In fact, in the long run we’re just accelerating our long-term fate.

Just a few weeks ago in fact, I saw a champion of this view, Judith Sloan, pen an article in the Australian, headlined “Face it, it may be too late to save manufacturing”. In it, Sloan correctly notes the long term decline.

There are currently about 850,000 workers in the sector, a decline of 1.7 per cent during the past five years. Total employment has risen about 12 per cent in this time. In the 1970s manufacturing employment represented 25 per cent of employment. Today it’s down to 6.6 per cent.

Sloan also observes that manufacturing jobs are generally jobs you can support a household with. That’s also true. If you have a job in manufacturing it’s far more likely to be full-time, than if you work in most other sectors. In fact, some 83 per cent of all manufacturing jobs are full time. These are the jobs my members rely on to feed their families. But they’re all doomed apparently.

Government has undersold its role

Now the problem with this Sloan-and-co assessment of the decline of manufacturing, is it happens to be completely at odds with the facts. Take a look round the globe and you’ll see competitive manufacturing in the 21st century has very little to do with low wages. Manufacturing powerhouses like Germany, Korea, the US, and Japan don’t rely on serf labour to outcompete China. They don’t misunderstand the productivity challenge as a race to the bottom. They long ago stopped worrying obsessively about the cost of inputs. Because they realised the main game was the value of the outputs.

Their bosses don’t generally fantasise about creating a peasant workforce that could somehow undercut the authoritarians in China. Instead they have focused on:investing in infrastructure and capital stock, encouraging R&D and innovation, training the next generation

And, most importantly, building more productive workplaces through collaboration that generally results in a greater share of wages for employees.

As a result these countries don’t see China purely as a manufacturing competitor…they see it as a customer. Imagine that! Doesn’t it feel strange to Australian ears. But it shouldn’t.

In some alternate reality Australia is producing billions of dollars worth of manufactured goods for the Chinese market. In this reality, we could still have that future. But only if our politicians step up, take some responsibility, and plan. We can’t keep closing our eyes and putting our faith in the mystic forces of the market.

Government the key

It just doesn’t work. And the COVID crisis should have been the wake up call we needed.

The pandemic gave us a good look at a world where we couldn’t buy everything on a needs basis from a global market. We got a jolting realisation of how dependent we had become. So we heard a lot of big talk about a manufacturing revolution. But even in the eye of the storm, we found the political muscles we wanted to use had atrophied.

Take the situation here in New South Wales back in April 2020. Premier Gladys Berejikilian announced what she described as an emergency “call to arms” for local manufacturers. With personal protective equipment stores running perilously low in the state, the Premier released a tender for Australian companies to make the PPE equipment domestically. 1800 local business enthusiastically applied to supply masks, sanitiser, and more. Of those, several hundred were highly credible and ready to roll.

So what happened? How many businesses won work from their own government? Zero.

Before they had a chance China decided it had developed the capacity, the state government said “you beauty”, and $1 billion of our taxpayer dollars was handed over to buy PPE from from the CCP. A billion dollars that could have been flowing into Australian businesses and Australian jobs.

It seems like after years of reflexively buying Chinese steel to build our rail lines, Chinese glass to wrap our landmark buildings, and Chinese products to fill our homes we simply couldn’t break the habit.

Harbour Bridge example

Obviously this is just one tiny example. To take just one more, consider the Sydney Harbour Bridge. This year the government needed to do millions of dollars worth of maintenance and repairs. What did it use?  $4 million of steel from northern Italy, $470,000 of concrete from Malaysia, $1.2 million of bolts and weldable bonds from the United States and $380,000 in other construction material from China. All of these materials could easily have been purchased from Australians. But we didn’t.

The story of the Sydney Harbour Bridge was not always so depressing. Indeed, when the Sydney Harbour Bridge Act was passed in 1922 it clearly required the tender to use as many materials made in NSW as possible. It stated: “The works authorised shall as far as practicable be constructed of materials produced and manufactured in Australia at the date of closing of tenders. … The constructing authority shall afford full opportunity to local industries to manufacture; or arrange for the manufacture and supply from Australian industries or production in fair competition with imported materials.”

At the time, the Australian steel industry was still in its infancy. But, the decision to stimulate demand for home grown products had a huge impact for generations to come. Approximately 10,500 tonnes of steel was sourced from the newly upgraded BHP Steelworks in Newcastle. The Whyalla steelworks then opened in 1938. And during WWII and beyond we were ready to meet the huge global demand for Australian steel.

In fact, we became the most efficient producer of quality steel in the world. But we only developed that capacity because the government was clearly and unashamedly proactive.

Yet it’s popular (poll)

So why do we lack this spirit today? Well, the answer is we don’t. The overwhelming majority of us don’t anyway. Last week, my union commissioned a demographically balanced poll of 2000 New South Wales residents. We put a range of statements to the sample to gauge support.

“Coronavirus should serve as a wakeup call for Australia – we should be making more essential products here and be less reliant on imports from China.” 82 per cent agree.

“Australian governments have a role to play in building, investing in and creating local industries to make Australia more self-sufficient.” 90 per cent agree.

“When the government builds infrastructure or invests in renewable energy it should use Australian-made products (e.g. Australian-made steel) whenever possible, even if it costs more.” 81 per cent agree.

And while are politicians have seemingly forgotten about how vulnerable we felt during the peak of pandemic uncertainty, the people certainly haven’t. Two of Australia’s four fuel refineries have announced closure since Covid. It leaves us perilously close to a situation in which we can’t make our own petrol and diesel.

To power our trucks, our cars, and our agriculture and mining equipment, we will soon be fully dependent on fragile supply chains running through global hotspots. But the best was to sum up the reaction from our political leaders is a shrug.

But does anyone really care?

Well, again we very fairly tested the proposition in our poll. We asked people if they agreed with this statement: “It doesn’t matter if Australia has the capacity to make its own fuel or not, because we can easily import the refined fuel we need from overseas.” Just 20 per cent agreed. Even when we suggested hard action that could result in a price impact, the reaction of people is very different to their elected officials.

We put this to the respondents: “The federal government should introduce a levy on foreign fuel imports and use the proceeds to support Australia’s capacity to refine fuel here”. 54 per cent agree against just 13 per cent who disagree.

So it’s not the public that’s lost enthusiasm for backing Australian manufacturing enterprise – it’s just their representatives.

Our politicians are frozen in a state of learned helplessness. Mired in a mind-set of passive government. Since the 1980s, a generation of decision makers living in their own conversation bubble, have somehow talked themselves into a near-religious belief that the government must not take a strong position in the national interest.

That it’s morally wrong to pick winners.

That it would violate the sanctity of the market.

They have lost the capacity to even structure deals in the national interest.

My main knock on conservative governments this century is not so much their ideology. It’s that they lack the capacity to negotiate effectively with their mates in business. Sure, they might stake some vague initial position of intent. But all the business sector needs to do is clear its throat and mumble something about sovereign risk, or competitiveness, or free trade – and our governments fold like a cheap suit.

They completely disregard the responsibility – and the power – they have. And instead of leadership what do we get? Some anonymous bean counter in the public service identifying a one-dollar saving from buying Chinese steel. And, as a result, thousands of Australians miss out on jobs. Their employer misses out on million in contracts.

Our economy misses out of the multiplier effects of more spending and new jobs. Our treasury misses out on tax dollars. And the nation misses an opportunity to build our sovereign capacity.

It’s never discussed that this apparent cost savings is an illusion when you take quality and reliability and life of product into account. The important thing is that we’re respectful to the gods of the free market. No one else pays such reverence to these gods by the way.

The Norwegian government didn’t bow to grumbles about sovereign risk and global competitiveness when they forced oil producers to chip into a giant sovereign wealth fund. The US government doesn’t let exporters send oil or gas overseas before its domestic needs are met. The Chinese Communist Party manipulates the output of thousands of Chinese factories, literally moving global markets in their favour, with a single, brief edict.

Olympics example

Funnily enough, we have no trouble industry planning when it comes to sport. When an Olympics rolls round we set national objectives – like finishing in the top 10 of the medal count. We pick winners – and dedicate resources to areas where we have a competitive strength. We invest in R & D – engaging the best sports scientists, and supporting our elite athletes through the Australian Institute of Sport.

When it comes to the Olympics, we don’t get hung up on esoteric arguments about the purity of global competition. In sport, Australians play to win. But when it comes to our job-generating industries, we show no such care. Maybe we should give out gold medals for manufacturing.

So what do we need to do?

If we want to revitalise Australian manufacturing – and the millions of quality jobs that potentially come with it – the most important thing we need to change is our fundamental focus on the outcome. Nothing else matters without that shift.

But that’s also a tough place to start. So let’s break it down into real actions. When we do this we see a 21st century Australian manufacturing revolution is not some pipe dream — it’s a very, very achievable goal.

Procurement

The first and most obvious piece lies with procurement – how governments choose to spend our tax dollars. Here governments can, with the stroke of a pen, choose to have a massive and direct effect. When we build roads, bridges, tunnels, schools and hospitals, it should be done using Australian-made products.

Right now, there are a huge number of major projects underway or progressing:

• The Sydney Gateway
• Snowy Hydro 2.0
• The Sydney Fish Market redevelopment
• The Circular Quay redevelopment
• The Western Sydney Airport

– And the M1 Motorway to Raymond Terrace

We have to be looking for every chance to build these projects with Australian steel, Australian aluminium, Australian glass, and Australian manufactured products. The federal government absolutely has to take the lead here.

If we leave it to the states we will be left with the absurd situation of Victorians building infrastructure with foreign materials, because there’s no incentive for them to look to say, New South Wales. Supporting Australian manufacturing, means taking a single Team Australia approach. It means making our National Cabinet actually functions in the national interest.

Dumping

But procurement isn’t the only lever government can pull. It could also start getting serious about anti-dumping measures. Periodically, the Chinese government considers it advantageous to produce low-quality steel at below cost to prop up employment in its key regions. It’s also strategic.

China knows if it floods the international market with millions of tonnes of subsidised steel at prices below the cost of production it can destroy rival domestic steel industries and go on to dominate the world steel market. We can’t stop China from doing this. A brutal authoritarian government has the luxury of trying long term plays like this. But what we can do is refuse to allow that below-cost steel to be dumped on our market and undermine Australia’s steel industry.

Of course, it’s not just steel. Dumping occurs across a range of industries. But most of the time we don’t know about it, or can’t act, because our Anti-Dumping Commission is woefully underfunded.

Anti-dumping is a lot like anti-money laundering or anti-drug running. It’s a constant game of cat and mouse. The perpetrators develop more sophisticated methods – China has been disguising and distributing its products through Vietnam for example.

Our legalistic process means that the case has to be started all over again. And that’s despite everyone knowing that the law breakers have become more sophisticated. We need to ensure our cop on the beat has the resources to keep pace. Certainly our friends in the US and the EU have no problem  imposing dumping duties on Chinese steel. We go the other way.

The Howard Government decided in 2004 to become one of the only developed nations in the world to give China market economy status – in exchange for a free trade deal. Based on the actions of the CCP in recent times against our agriculture sector – a deal that isn’t worth the paper that its written on.

This market status isn’t just a fancy term. It means we have to take China’s word on a range of issues without recourse to check the numbers and behaviours ourselves. It’s severely hampered our capacity to deal with the surge in dumped Chinese imports. We should change this. We need a nimble, agile dumping regime that gives us the opportunities to move quicker.

Energy

Another step government must take to create the conditions for a manufacturing comeback is to sort out our mystifying energy affordability mess. We are blessed to live in a nation with abundant energy reserves: coal, gas, uranium, hydrogen, renewables – we have it all. Yet, somehow, we manage to charge our businesses the world’s highest prices for power.

This mismanagement of our energy wealth has been responsible for the loss of hundreds of thousands of quality jobs and has sent billions of investment dollars offshore. Obviously, the main reason we can’t seem to get two and two to add up to four on energy is the extreme politicisation of this issue.

As the leader of a blue collar union, I’m constantly being asked to make a choice between the environment and jobs. It’s a false choice.

Yes, manufacturing industries like steel, aluminium, and concrete are extremely energy intensive. And it’s true that you can’t run these mills or smelters or factories off renewables alone, at this stage. They need to operate constantly, even when the sun isn’t shining and the wind isn’t blowing.

But if we want Australia to become the world’s first zero net emission manufacturing superpower then we need to hang on to the manufacturing capacity we already have to build on it. I know there are greens out there who mark me down as some kind of Captain Planet supervillain for holding this position. And I understand how de-industrialising Australia might feel like the right thing to do for the environment.

You could raze the Tomago aluminium smelter and plant a native forest as a bird sanctuary.  You could knock down BlueScope steel in the Illawarra and replace it with a walking track.  You could shut down OI glass in Penrith and establish an eco-farmers market. It would all feel great. But it wouldn’t do a thing for the climate. The world would still demand aluminium and steel and concrete.

So, every factory we shut down will likely be a factory built in China, a place where green activists are given less room to move. Often literally.

Renewables – build them here

So blue collar workers and their representatives have no beef with renewables. It’s just that we understand we need to make the switch in a sensible way that allows manufacturing to survive and thrive. Although if I have a problem with renewables it’s this: we are missing the jobs bonanza in manufacturing them.

You hear a lot of airy talk about green jobs. But those who use the phrase typically have no idea what they actually are. I think they envision transforming a coal miner into a yurt cleaner for eco retreat or something.

My challenge to them is this: show me the job advert that I can show to a mining worker, earning over $100,000 a year, that proves there’s an equivalent position for them in renewables. Let me tell you, it’s not a job installing solar panels. These are low paid, insecure, low skill.

But there is enormous employment potential in the global transition to clean energy – it’s in manufacturing. So, if we’re going to pick winners — as we absolutely should — let’s pick renewable component manufacturing.

But we need to be smart about it. At one point the richest man in China was a photovoltaics entrepreneur who learned everything he knew at Australian universities. Not much of a photovoltaics industry here, however. He took that tech – and the jobs – to mainland China.

Realistically, I think we probably need to accept we missed the boat there. Solar panels are being produced at such scale in other parts of the world that it’s probably a fool’s errand to try and play catch up. We could, however, be making turbines for wind power. But, again, we have to be smarter.

Currently we have only one wind turbine manufacturer – Kepple Prince in Portland Victoria. But even they struggle to get work – despite the boom in wind farms.That’s because our own governments are not holding contractors to account in the specification/design phase or the purchasing decisions. That means no work for Aussie manufacturers.

That’s easy to change; but it requires our governments to pay attention. The huge opportunity, however, is in battery tech. We have everything we need to become a global leader.  Although batteries feel ubiquitous, the world is still trying to crack the challenge of commercial grade storage.

We should be trying to crack it here. A huge proportion of the world’s rare earths necessary for mass production of batteries lie under our feet. The world is crying out for these precious minerals – but Australia is faced with a choice here. We shouldn’t be content with digging them up and shipping them offshore. We should be adding value to those minerals here.

We have the whip hand.

We can say to global industry – sure you can have Australia’s rare earths. But you have to set up operations in Australia when you go to the manufacturing stage. This is normal practice. It’s exactly what we did in the past.

When we discovered bauxite we didn’t just ship it offshore. We said to the world if you want to dig it up, then you will also have to refine it and smelt it and make aluminium here. That’s the kind of deal we should be making to set up a thriving Australian battery manufacturing industry.

Let’s not miss this historical moment the way we missed solar panels.

The government could dust off AIPP

Now such policies should be fairly straightforward to implement. All that is required is a modicum of political will and vision. But if the government is looking for a framework it doesn’t need to invent one.

Scott Morrison could just check the bottom draw of his desk and see if he can find the Australian Jobs Act Tony Abbott stashed there when he displaced the last Labor government. In the last months of the Gillard Government, Industry and Innovation Minister Greg Combet introduced the Australian Government’s Industry and Innovation Statement. The purpose of which was to:

– Back Australian firms to win more work at home

– Supporting Australian industry to increase exports and win business abroad and

– Helping Australian small and medium businesses to grow and create new jobs

The point was to do something we’ve frankly never been very good at in Australian government: linking capability with opportunity.

It set out how capabilities, like our skills, our educated workforce and our research bodies

can be linked with opportunities, like government procurement and grants; and supplier access to major projects. Under the Australian Jobs Act major projects worth $500m or more were required by legislation to develop Australian Industry Participation plans to give local industry a fair chance to win work. Projects worth more than $2 billion, which seek tariff concession on imported materials, would be required to create and Office of Australian Industry Capability in their global corporate or procurement headquarters. They would have to identify opportunities for Australian firms to take part in their global supply chains.

I’d argue those caps should be even lower to make sure we’re capturing the full array of spending in Australia. A new Australian Industry Participation Agency would work with local business to take advantage of opportunities to work on major projects or tap into global supply chains of international companies.

The policy also included anti-dumping measures, industry innovation precincts, and providing growth opportunities and leadership development (GOLD) for small to medium enterprises. Honestly, bring it back, ScoMo. Give it a snappier name. Call it Job Peaker or something. Because you will be cheered from the rafters.

The most frustrating thing about the next Australian manufacturing revolution is how tantalisingly possible it is. Hundreds of quality blue collar jobs lie within easy reach.

We just need the political courage to reach out and grab them.