AU manufacturing was in decline but covid might revive it

ABC news interviews AML3D’s Managing Director, Mr Andrew Sales, about the economies of manufacturing locally for ships, oil & gas and defence sector to reclaim Australia’s share of manufacturing


Key Points:
  • Australia only produces two thirds of the amount of manufactured goods it consumes while most developed nations produce excess
  • Manufacturing as a percentage of GDP has fallen from almost 30 per cent in the 1950s and 60s to just under 6 per cent last year
  • The manufacturing sector is calling for government incentives to help boost the sector as part of its COVID-19 recovery plan

The widespread shutdown of global supply chains caused by COVID-19 has been good news for Adelaide metal printing company AML3D.

His company makes metal parts, such as propellers and compressors for ships and the automotive industry, at its factory in Adelaide and exports them around the world.

The parts are created using a new layering technology, developed by Mr Sales, that combines traditional welding techniques with digital drawing, a robot and 3D printing to create metal objects out of titanium, aluminium, nickel and steel.

“Parts and components normally produced in northern Italy and other parts of Europe at the casting shops and forging shops, with the recent unfortunate COVID-19 environment shutting down a lot of this industry, some of these customers in Australia are looking for local solutions,” said Mr Sales. 

There is growing interest from the oil and gas sector for his locally made products, as Mr Sales also eyes off orders as part of the Royal Australian Navy’s fleet expansion.

“Our technology offers the possibility of reduced lead times and reduced manufacturing times and the process we’ve got actually offers enhanced strength, which is more beneficial than the traditional casting and forging techniques,” Mr Sales said.

AML3D has been fielding extra orders since many of its larger competitors in Europe were forced to shut. (ABC News: Michael Clements)

Australia’s share of manufacturing

AML3D’s growth is the kind of resurgence economists and those in the sector want to see more of to pull manufacturing out of its decline.

In the late 1980s manufacturing was the biggest employer in Australia, with 16.5 per cent of the workforce.

Now less than 1 million people work in the sector, accounting for 6.4 per cent of jobs.

Manufacturing’s contribution to GDP peaked in the late 1950s and into the 60s when it was just shy of 30 per cent. Now it has shrunk to about 5.5 per cent.


A worker uses a tool to shape metal at AML3D’s factory in Adelaide.(Supplied: AML3D)

New analysis shared with The Business by The Australia Institute’s Centre for Future Work reveals Australia does not fare well against its OECD counterparts.

“Most other industrial countries have manufacturing sectors that are successful and large enough to, in aggregate, meet their own domestic needs for manufactured products,” report author and director of the centre Jim Stanford explained.

“In Australia’s case, however, we’re using more manufactured goods all the time but we’re producing a smaller and smaller share of those.”

Dr Stanford has ranked OECD countries based on their manufacturing self-sufficiency — the amount of goods they manufacture versus the amount of manufactured goods they use.

Australia is last, producing about two thirds as much manufactured output as it consumes.

Most other OECD countries produce, on aggregate, more manufactured goods than they consume.

Chart: Rachel Pupazzoni Source: Centre for Future Work, OECD ‘Statistics on Trade in Value Added’. Get the data

“Australia has one of the most underdeveloped manufacturing sectors of any industrial country in the world,” Dr Stanford told The Business.

“I think there is a mistaken assumption that if you’re a rich, high-wage, industrial country you just can’t do manufacturing. After all, it’s much cheaper to do things in China or Thailand or some other low-wage country.

“We found that traditional assumption is absolutely false.”

Job maker

Dr Stanford estimates that increasing Australia’s manufacturing self-sufficiency to 100 per cent could add another $180 billion a year in new manufacturing output, boost GDP by $50 billion a year and add more than 650,000 direct and indirect jobs.

“I think it’s a pragmatic and ambitious goal to try and rebuild manufacturing in Australia back to a level that’s comparable to our own need for manufacture,” Dr Stanford said.

Dr Jim Stanford is the director of the Australia Institute’s Centre for Future Work.(Supplied: Australia Institute)

 The impact the COVID-19 pandemic has had on businesses and workers across the nation is well documented.

The latest official unemployment rate rose to 7.4 per cent for June, but Treasurer Josh Frydenberg conceded this week the real unemployment rate was probably about 11.4 per cent.

Advocates for manufacturing say the sector could again be a major employer if it is encouraged to grow.

Most of the 926,000 workers in the sector are employed by small to medium enterprises (SME) with fewer than 20 employees.

“We’ve gone from being a very significant employer to less than a million people now,” said Vonda Fenwick, the chief executive of the South East Melbourne Manufacturers Alliance (SEMMA).

Her group is one of many calling on the Government to incentivise more manufacturing in Australia.

“If you look at any economically successful country in the world, you’re looking at a country that’s got a healthy, robust, industrialised sector, you’ve got a country that’s manufacturing.”

SEMMA is calling on all tiers of government to buy more locally made goods.

“It simply makes sense for us to be really sticking to those policies, making sure that we’re buying locally, making sure that we are mandating local content requirements to ensure that we’re providing work for manufacturing.”

Vonda Fenwick wants governments to mandate local content requirements when they buy goods.(Supplied: Vonda Fenwick)

Local supply chains

After the roofs of the Australian National University and the National Library of Australia were damaged by January’s Canberra hailstorm, they were covered in an Australian invention made in Sydney.

Stormseal is a polyethylene film that is laid on storm-damaged roofs. Heat is applied to it and it shrink wraps onto the roof.

The company’s managing director Matthew Lennox makes the product on food-grade manufacturing facilities in Sydney and most capital cities in Australia.

The company’s managing director Matthew Lennox makes the product on food-grade manufacturing facilities in Sydney and most capital cities in Australia.

He also has plants making his product in France and the US.

“We call it a storm-ready response product, so what that means is that when a big storm hits we actually have the ability to make it on demand, which allows us to not to have to hold stock or have expenditure when we don’t need it,” he said.

Mr Lennox has been approached to produce the film in Asia where it would be cheaper, but he said making it close to his customers meant he could deliver the film more quickly and support the local economy.

Stormseal chief executive Matthew Lennox says he prefers to manufacture locally, near his customers, for quick delivery.(ABC News: John Gunn)

“It’s good in respect to keeping jobs here in Australia for the reason of the manufacturing side of things,” he said.

“But it’s not just the manufacturing, it’s the supply chain that has benefits too, so our polymer, our fire retardancy, our UV inhibitors that go into the film, that all has a flow-on benefit.

“Outside of that, we’ve got several consultants that we use for marketing and sales and communications that are all Australian based too.”

About 30,000 square metres of his product remains on the roofs of national buildings in Canberra.


More than minerals

Australia’s extensive mineral resources — including iron ore, bauxite and nickel — plus other primary products, such as agriculture, account for about three quarters of our goods exports.

The wealth created by exporting raw mineral and resources products was almost $290 billion last year.

Last year almost 75 per cent of Australia’s exports were primary products (minerals, LNG and farm products) worth almost $290 billion.(ABC News)

However, Dr Stanford said Australia was selling itself short by exporting minerals such as lithium, a mineral we are the largest producer of in the world, in its raw form.

“Once again we’re limiting our horizons to just digging it out of the ground and then sending it to other countries, to then manufacture it into these value-added products that we then import back from them,” he said.

“Lithium is worth about $US750 ($1,046) a tonne in its raw form but, if we actually manufacture it into batteries, that same amount of lithium would be worth about $US150,000.

Dr Stanford said there were also strategic benefits to increasing manufacturing.

“About two thirds of all world trade consists of manufactured products, so if you don’t have a strong domestic manufacturing base you’re shutting yourself out of most world commerce,” he said.

About AML3D Limited
AML3D (ASX:AL3) is an Australian listed company redefining productivity with the use of wire additive manufacturing WAM® to create certified, stronger products more efficiently.  Incorporated in 2014, AML3D utilises 3D printing to solve complex challenges with metallurgy, proprietary WAM® process and software  WAMSoft® more sustainably than traditional manufacturing methods.  AML3D provides manufacturing on demand services  in contract manufacturing centres and is the original equipment manufacturer of Arcemy®, world’s first ‘production-ready’ metal 3D printers that utilise locally sourced materials to create high performance products closer to the location of use.