There is something genuinely unique about Australian business. The fact we are an island continent cultivated an early proclivity to manufacture goods.
It wasn’t all that long ago that footwear was made in Collingwood and clothing in Flinders Lane. The tyranny of distance made the Australians adept at making things.
This was before consumer goods began to be imported from places such as Guangzhou. From textiles, clothing and footwear, the globalisation of manufacturing progressively diminished our ability to compete in carmaking, in steelmaking and even in alumina smelting. We still make stuff, but the perception is that our manufacturing sector is dying. But is this correct?
The accompanying chart shows the relative decline of manufacturing as a proportion of the workforce in the US and Australia across three decades.
Manufacturing employed 19 per cent and 17 per cent of the workforce in the US and Australia respectively in 1984. Figures from last November show these proportions have dropped to 8 per cent and 7 per cent.
But the following chart shows there has been a turnaround in US manufacturing: the number employed in this sector has increased from 11.5 million in 2009 to 12.6 million in January this year.
More than one million jobs have been added to US manufacturing since the global financial crisis. Could this be the so-called on-shoring effect, where a plant is brought home so production runs can be nuanced, so quality control can be more tightly managed, where there are fewer moving parts to distribution?
And could this modest manufacturing revival surface here?
Despite conceding 10 percentage points in workforce share to other industries, mostly services, since 1984, Australian manufacturing still accounts for 877,000 jobs, down 218,000 jobs across 32 years and down 110,000 since the GFC.
The 2016 census shows the Australian manufacturing workforce is a bit of a mixed bag.
Yes, its profile is older than the balance of the workforce (see age chart), but it also offers hope and opportunity, and not just for the hip and the young. About 25,000 workers, mostly in their 30s and early 40s, in this sector have postgraduate qualifications.
Another 33,000 workers, mostly in their late 40s and 50s, have completed only Year 9 (meaning they left school at 15).
Here is an industry that delivers opportunity to the educated as well as to the battlers.
In many respects, factories are the great melting pots of Australia; all types pass through their gates.
The largest single collection of manufacturing workers on the Australian continent is to be found in Dandenong in Melbourne’s southeast. More than 17,000 factory jobs are located in Dandenong and Dandenong South. The second biggest factory job location is Campbellfield and Coolaroo in Melbourne’s north, where there are 9000 such jobs. Both Dandenong and Campbellfield were once dominated by car making for GMH and Ford.
In Sydney’s Wetherill Park there are 5000 factory jobs; in an area just south of Port Adelaide there is another cluster of 5000 factory jobs. Brisbane’s manufacturing heartland is Rocklea (5000 jobs); in Perth, the factory hot spot is Malaga, near Mirrabooka, with 3000 jobs.
There are 10 suburbs in Melbourne that offer more factory jobs than the biggest cluster of factory jobs in Perth.
Melbourne is the undisputed heartland of Australian manufacturing. Ford, GMH and Toyota had all established plant in Victoria by the 1960s. And it made sense. Melbourne was and remains the nation’s premier port. It had held and developed a technical skills base carried over from the 19th century. And it was home to the trade union movement.
I think there is a residue of this history still evident in the city today. The Greens’ single Australian electorate covers Melbourne’s beating heart.
Melbourne has always been more lefty than Sydney. I think its manufacturing dominance had its roots in the discovery of gold in Ballarat in the 1850s.
And it’s easy to see why manufacturing and the trade union movement centres on Melbourne. Unskilled labour needs the bargaining power of a union to leverage improved conditions.
The peak median income across the life cycle for a full-time product assembler at the 2016 census was recorded at $44,000 for a worker aged 45 to 49. Indeed there’s barely a 10 per cent income premium for product assemblers aged in their 40s over and above the income earned by their equivalent aged just 20-something.
There are 18,000 product assemblers in Australia and most of these live in Melbourne.
Manufacturing dominates some towns. Whereas 7 per cent of the Australian workforce is engaged in manufacturing, in Griffith, NSW, this proportion is 20 per cent. In Colac, Victoria, it is 19 per cent. In Portland, NSW, it is 17 per cent. In Whyalla, South Australia, it is 16 per cent.
These towns process and add value to rice and to timber and/or refine or smelt steel or alumina. Barely 2 per cent of the Alice Springs workforce works in manufacturing. And it makes sense: why transport material to the Alice, only to ship it out again to a market? I suspect the manufacturing done in this township (involving 200 workers) is probably in something like making window frames.
But even though there has been shrinkage in the number of Australian factory jobs and especially since the GFC, there are bright spots. Between the 2011 and 2016 censuses, the number of workers employed in bread manufacturing (factory-based as opposed to artisan) increased by 10,000 to 24,000. The number employed in meat processing increased by 4000 to 29,000. The number employed in poultry processing increased by 500 to 13,500. Other growing jobs in manufacturing across this period include log sawmilling (up 400 jobs), beer manufacturing (up 200 jobs) and spirit manufacturing (up 100 jobs).
Those parts of Australian manufacturing that are expanding, or are at least employing more workers, largely involve adding value to agribusiness product.
This is downstream value-adding and it is precisely the kind of manufacturing in which Australia should excel. Plus, many of these factory jobs can be completed in country towns. Australia has already conceded sovereignty in much of the dairy processing and meat processing industries to the likes of New Zealand, Italy, Canada, Brazil and the US.
Maybe we should focus on ways of not just adding value to our agricultural product but also on innovative ways of retaining ownership.
Sadly, there isn’t any sign as yet of a reversal of the long-term decline in Australian manufacturing employment, as there has been in the US for a decade. But then the US manufacturers on-shoring plant can sell product to a local market of 320 million. Australian manufacturers will always struggle with the modest scale of the local market at 25 million.
Perhaps the way of the future is to find those areas where we have a natural advantage, such as the downstream processing of agricultural product, and develop skills, markets and expertise to leverage further advantage for the Australian people.
We still make things. Some factories are even expanding by taking on more workers. We cannot and we should not abandon manufacturing, even in a public perception sense. The manufacturing process cultivates skill sets that are essential to national resilience.
Australia has a proud tradition of making things and of delivering a pathway to prosperity for many, if not for most, of its workers.
Many of our manufacturing skills and markets are being disrupted by powerful new global forces. A strong manufacturing industry is essential if we want to project to the next generation bold ideas such as the preservation of our independence and the cultivation of a culture of technical ingenuity. Making Australia make things is good for all Australians, now and into the future.
Bernard Salt is managing director of the Demographics Group. Research by Simon Kuestenmacher.
