23 November 2015

The Future of Manufacturing

Australia's remaining big manufacturers certainly don't want to be treated as the national representatives of sunset industries, slowly but inevitably subsiding into economic irrelevance.

Not only is that completely inaccurate, according to Manufacturing Australia. It ignores the massive innovation and restructuring going on in traditional manufacturing. But there's no doubt urgent changes are required to underpin the ability of our manufacturing sector to survive and thrive in a now much more global, much more competitive world.

That clearly includes industrial relations reform. Yet the prospects for this seem to have receded in recent years. Nor do changes to industrial relations law seem like a priority during a new political zeitgeist dominated by debates over tax or energy policy or encouraging the start-up culture.

But although the outcomes in all such areas are also crucial to the manufacturing industry, manufacturers still face distinctly old-fashioned difficulties in delivering sensible outcomes from enterprise bargaining in their workplaces. That's despite the savage decline of union membership overall.

So Manufacturing Australia is releasing detailed recommendations on Monday about the "pragmatic, sensible" changes to workplace relations it considers essential for the long-term viability of manufacturing.

That combination of measured optimism about the future, but a clear warning about what's needed now is significant given Manufacturing Australia represents nine large manufacturers and 40,000 direct employees. While manufacturing and its associated services now only contribute 6.8 per cent of GDP, the general health of the sector also has a massive indirect influence on an economy increasingly dominated by services industries.

It's the future profitability and competitiveness of companies like Bluescope, Incitec Pivot, CSR, Cement Australia and Capral these will help determine the sort of jobs and skills that help round out a domestic economy.

And it's why Manufacturing Australia argues the industry is facing a profound productivity challenge. Labor productivity is only one aspect of that, of course. Consider the long-term failures when it comes to better training and skills development. Or establishing closer connections between research and industry. Or producing enough local managers able to leverage global trends and opportunities.

Such weaknesses only make it more urgent to improve efficiency and productivity on the factory floor at the same time.

Mark Chellew, the chairman of MA, concedes labour productivity is far from the only challenge in his sector.

"But we would be naïve to say it's not a significant problem," he says. "It's one of the competitiveness gaps we just have to address."

Manufacturing Australia's primary emphasis on restoring the ability of employers and employees to bargain directly and only on a limited range of matters affecting employment conditions. This is rather than the current system of having enterprise negotiations dominated by unions and often covering a much broader agenda following changes to the law introduced by the former Labor government.

Chellew acknowledges the need for a "strong safety net" in the form of national employments standards, but maintains Labor's laws gave too much power to the unions to stymie sensible bargaining.

So Manufacturing Australia also backs the Productivity Commission's draft recommendations for a restructuring of the Fair Work Commission to allow it to play a more active and collaborative role as a "change agent" in some cases when employees are represented by unions.

He cites the positive example of the Fair Work Commission helping to negotiate the recent agreement at Bluescope Steel. The workforce committed to $200 million worth of savings as the price of not closing the nation's biggest steel works at Port Kembla. According to Chellew, the situation should still never have got to the pressure point where the steelworks were at real risk of closing unless a deal could finally be put in place. Manufacturing Australia argues a more actively involved commission can assist unions and employers avoid that sort of crisis management.

Read the full story here.