The surprising story of Australian manufacturing

Donald Trump would call it fake news. American humourist and writer Mark Twain described fake news much more eloquently in one of his most famous one-liners: ‘Reports of my death have been greatly exaggerated.’ Always loved that wit.

The Australian manufacturing industry suffers from the same problem. It gets a bad press. A really bad press. You’d think it was on its last legs. You’d think we’d be hard pressed to make something as simple as a paper bag.

Don’t believe it. The thing ain’t dead yet. As the Stats Guy, I look at the facts. They tell a very, very different story. The truth about what’s going on in our factories will surprise you. It might start like a whodunit but then morphs into something quite different – a good news story.

Let me explain. For a long time, Australian manufacturing was guarded by protectionist tariffs which ensured that imported goods were so expensive that locally produced goods could easily compete on price. In 1970, more than 25 per cent of Australian workers worked in manufacturing. Slowly, tariff barriers were rolled back, allowing for more international competition. By 1984 only 17 per cent of the workforce was employed in factories. Today only a measly 6.8 per cent of Aussie workers are employed in manufacturing. Whenever we opened the paper, there was another tale of woe. Yet another high-profile factory was closing. It got so bad we couldn’t even produce cars in Australia. Holden and Ford disappeared.

Sounds like a simple narrative of a dying sector, but keep reading because there’s a twist worthy of John Grisham.

While the share of workers employed in manufacturing plummeted and the sector lost its prominence, the total job losses weren’t anywhere near as dramatic. Sure, over 200,000 manufacturing jobs were lost since 1984 (going from 1.1 million to 900,000 workers). And each of those numbers is a real person – and the loss of a treasured job has real consequences. That said, employment in the sector declined by 19 per cent, which is much less spectacular than the drop to below seven per cent of the workforce would suggest.

The real story is this. Australian manufacturing is actually quite healthy. Six of the 19 sub-industries that make up manufacturing recorded growth over the last 37 years.

Food manufacturing (the largest sub-industry) employs 206,000 people and grew by 28 per cent (45,000 people) since 1984. Why? It’s simple. Our growing population ate more breakfast. Beverage production and basic chemical production increased at even higher rates of around 50 per cent, collectively adding another 34,000 jobs.

Over the same time, the Australian workforce doubled, suggesting a major trend in manufacturing. We need fewer workers these days to achieve the same outcome. No surprise there. Manufacturing has transformed. These days it’s about more complex machinery, robotics, automation and just-in-time parts delivery as much as boots on the factory floor.

Let’s not get too technical here but some of the lost manufacturing jobs weren’t lost. They migrated into warehousing and logistics. These functions were outsourced in supply chains operating under the just-in-time model to avoid warehousing costs.

The pandemic has reminded us about the importance of our national manufacturing sector. The way we think about it, talk about it, has changed. The new pandemic conversation goes like this. Are we self-sufficient in important things?  Could international supply chains collapse? Will we have enough food (and more importantly toilet paper)? At the start of the pandemic, there was one company in Australia able to produce medical grade facemasks. We were relieved when textile manufacturers pivoted to produce masks at scale. We needed that. Let’s not forget early initiatives enabling local manufacturers to build ventilators. We needed that too.

The pandemic has impacted the Australian psyche in many ways. Some of the changes, we will never forget. We became aware – after 29 years of uninterrupted economic growth – that bad times happen. We felt safer knowing that we could work to safeguard Australia against future disasters or the next pandemic.

Early in the pandemic, the National COVID Coordination Commission suggested Australia should strengthen eight sub-industries in manufacturing: food manufacturing, mining technology, defence, renewable energy, healthcare and biotechnology, recycling and packaging, advanced manufacturing, and aerospace.

The taskforce (perhaps feeling overly optimistic) estimated that investment in manufacturing could potentially create half a million new jobs in the next decade. I think the number will be significantly lower but, nonetheless, we should be able to grow our manufacturing workforce by hundreds of thousands of workers. The federal budget committed money to this. That fills me with a sense of optimism.

But there’s something I like even better than that. I think we’ll see plenty of highly skilled jobs (think university-educated) and middle-skilled jobs (think TAFE-educated) added to the workforce. As I wrote in a previous column, we desperately need more middle-skilled jobs in Australia. Heavy investment in manufacturing will provide such jobs at scale.

Of course, there’s one problem. Getting enough skilled workers. As long as borders remain closed, we can’t import talent and rely on upskilling workers through the TAFE system.  But I know how to fix that too. Make relevant TAFE courses free and encourage poorly skilled workers to upskill. That’ll work.

Of course, that brings me back to Mark Twain. It’s one of his lesser-known lines but worth quoting. ‘Truth is stranger than fiction, but it is because fiction is obliged to stick to possibilities. Truth isn’t.’  Ain’t Mark Twain grand.

Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. Follow Simon on Twitter or LinkedIn for daily data insights.