1 August 2012

Australian manufacturing needs courageous leadership

Australian Financial Review, Opinion: Dick Warburton, Executive Chairman, Manufacturing Australia

Many of the challenges impacting Australian manufacturing today are challenges we’ve faced before.

Fluctuations in the Aussie dollar, high input costs, unbalanced competition with international importers, inflexible industrial relations laws and unproductive regulations are all familiar.

None of these challenges are insurmountable, but cumulatively, they’re formidable.

Today, however, Australian manufacturers face a new challenge. We need courageous political leadership – from all parties – in order to make the hard decisions that will ward off the continued decline of Australia’s manufacturing base.

We hear about the “two speed” or “patchwork” economy so often that its significance is becoming understated.

And as a community we rightly question the wisdom of taxpayer funded bailouts for struggling manufacturers, but then wonder why there is not more vigorous and earnest debate about the policy reforms that might break this unsustainable cycle.

The problems impacting Australia’s non-mining industry sectors are increasingly put in the “too hard basket”.

Australia’s progress on industrial relations reform is disappointing, and is being stymied by slogans and tokenism taking the place of earnest debate.

It is a sad indictment of our industrial relations system that closing a factory in Australia is industrially easier to achieve than shedding 10 percent of the workforce or outsourcing non-core activities so the factory can be kept open.

In the global economy of 2012, smart Australian companies know the value of a positive workforce – and they most certainly aren’t trying to rip off their employees.

For employees and employers to enjoy a fruitful outcome, both parties need to work collaboratively and be driven by the best interests of the business and, by definition, its employees.

Presently the reverse is the case, with direct relationships between employees and employers undermined by third parties having the legislated right to become default bargaining representatives for employees, even when not appointed by employees.

Australian businesses need real industrial relations reforms in order to remain competitive internationally. How far those reforms should go is a matter for important debate, but despite persistent pleas from the business community, that debate is deemed too hard, too controversial and generally off limits.

A similar story can be found in the myriad regulatory burdens that are throwing a wet blanket over Australian industry when government’s ought be looking for opportunities to relieve domestic pressures on businesses struggling with global challenges.
Government regulations are an important part of Australian industry where they can encourage continuous improvement without damaging the economic value, competitiveness or normal functioning of businesses.

But regulations that are applied inefficiently or inconsistently, which change frequently without proper consultation with industry, or which directly contradict other regulations, are smothering Australian manufacturers who should be focused on seizing commercial opportunities, not on regulatory compliance.

The introduction of a carbon tax was designed in part to replace the myriad inefficient state and federal schemes that were in existence to reduce our carbon emissions, yet most of those inefficient schemes remain in place and look likely to be expanded alongside the carbon tax.

A mature debate about Australia’s industrial future should be examining these issues, along with others plaguing domestic manufacturing.

Our political leaders should be asking the hard questions about what Australia’s industrial make-up will look like when the mining boom slows, as it inevitably will.

John Button asked those hard questions. The Manufacturing Council asked those questions in the 1980s and 1990s. But where is the political leadership with the courage to ask those questions today?

We all agree there is a two speed economy. We are looking to our political leadership to narrow the gap.

Industrial relations reform, deregulation, tax reform and adding value to our natural resources are all ways we can do that.

But to progress those reforms, we need proper debates amongst our political leaders, driven by champions of Australian industry and a well balanced manufacturing council.

Sadly, it seems in those regards Australia is sorely lacking.