Open Letter on Future Made in Australia

We are economists, political-economists and policy specialists in related fields, writing to express our support for active measures to strengthen Australia’s manufacturing capabilities and guide investment in critical infrastructure, including measures proposed in the Commonwealth government’s Future Made in Australia policy framework.

Australia faces an historic imperative to strengthen and modernise its capacity to develop and produce a full range of technology-intensive, sustainable, globally marketable manufactured products. Australia’s strategic weakness in manufacturing has been evident for many years. But the need to overcome that weakness is especially pressing given stresses and risks in global supply chains (associated with global health, geopolitical and climate crises), and the overarching need to accelerate the global energy transition (requiring massive inputs of high-value manufactured products for generation, storage, transmission and use of renewable energy, and the electrification of industry, transport and buildings). Meanwhile, mounting climate impacts in Australia and globally confirm the urgent need for investment in climate-resilient infrastructure in energy, transport and water systems.

Recognition of the strategic value of manufacturing and the essential role of government in directing investment and innovation has sparked an historic turn in economic policy around the world. In most industrial countries, outdated ‘comparative advantage’ theories of trade and development – according to which countries should automatically specialize in products predetermined by natural resource endowments – have been abandoned. There is new recognition that competitiveness is deliberately created and shaped, through proactive policy interventions that push both private and public actors to do more than market forces alone could attain.

Historic policy shifts in the U.S. (including the Inflation Reduction Act and the CHIPS and Science Act) are remaking national manufacturing there. Other countries (including the EU, Canada, Japan and Korea) are implementing powerful measures to expand and modernise manufacturing, especially in sectors tied to the clean energy transformation. China’s pro-active strategies, which have achieved global dominance in many supply chains related to the energy transformation, confirms the value of active policy in shaping sustainable manufacturing and infrastructure.

This historic redirection in policy has sparked predictable, knee-jerk responses from critics in Australia (such as the Productivity Commission), trying to defend outdated laissez-faire thinking. As these critics re-hash decades-old debates about industry policy, other industrial countries are implementing a new vision of economic statecraft for a world that is changing rapidly. The focus of public debate should now be on how Australian workers and communities can best benefit from this global transformation in energy, manufacturing, and infrastructure – and that will require powerful pro-active strategies.

Australia faces a vital choice. Decades of policy neglect for manufacturing, combined with support (including subsidies) for mineral extraction and export, have left Australia with a distorted and unbalanced economy. Among all OECD countries, Australia has the smallest manufacturing base (relative to overall GDP and employment), and is most reliant on net imports of manufactures to meet its own growing needs for manufactured products. This exposes Australia to a wide range of economic, social, environmental and geopolitical risks. Meanwhile, powerful corporate interests keep pressing to extend and expand their ‘extract and export’ business model.

Australia’s over-dependence on raw resource extraction and export undermines prospects for more sustainable, value-adding activities, via numerous channels: diverting capital and labour resources, contributing to exchange rate overvaluation and instability, and distorting fiscal policy settings, regional imbalances, and democratic processes.

If we continued on this path, Australia would miss an historic opportunity to rebuild a sophisticated, technology-intensive, and sustainable manufacturing capability – and participate fully in new global markets for clean energy and manufacturing. We would continue exporting raw minerals (including critical minerals like lithium). But we would squander opportunities to add value to those minerals, and develop a more diversified and sustainable industrial mix. We would remain on the losing end of lopsided trade relations: selling unprocessed resources to buy back more expensive value-added products (like transmission equipment, batteries, and electric vehicles). And our future prosperity would be jeopardised by a failure to seize the economic and industrial opportunities of the global energy transition.

In contrast, by rebuilding and modernizing sustainable manufacturing and infrastructure, linked fundamentally to the energy and climate transition, Australia could create hundreds of thousands of well-paying industrial jobs, support regional economies, and contribute significantly to decarbonisation in Australia and globally.

For these reasons, we strongly support active strategies to modernise and strengthen Australia’s manufacturing and renewable energy industries and infrastructure, with a particular focus on products related to the energy transformation. The Future Made in Australia proposals represent an important recognition of the strategic importance of manufacturing, and open up hopeful opportunities to develop and realise this mission. The recent Commonwealth budget makes a critical downpayment on this strategy, with measures targeted at several key sectors (including renewable hydrogen, critical minerals processing, and battery and solar manufacturing).

Key next steps in a full national strategy should include place-based innovation clusters, massive investments in vocational and technical skills, support for other sustainable manufacturing activities (from green metals to wind power equipment to electric vehicles), the active use of public procurement to nurture domestic production, and other measures to support sustainability and a circular economy. This overarching effort to develop a sustainable manufacturing capability must operate in tandem with strong and consistent policies to reduce fossil fuel production, use and emissions over time. And the strategy must feature strong labour, environmental and social conditionalities to ensure that the revival of manufacturing strengthens workers’ rights, Indigenous rights, women’s participation and equality, and environmental protection. These conditionalities – in essence, ‘sticks’, to go along with ‘carrots’ – are essential to advance the public interest and ensure the benefits of a Future Made in Australia are broadly shared. Finally, the strategy must also reach offshore to support just and socially responsive decarbonisation and climate-resilient trajectories for our Pacific neighbours.

Using the full suite of policy levers available to government, a Future Made in Australia strategy could rebuild a strong, sustainable manufacturing sector, with spill-over benefits that spread throughout the economy and society. We strongly support this important shift in emphasis and vision. We firmly believe that sustainable manufacturing must play a vital and strategic role in Australia’s economy. We look forward to contributing to the further development, expansion and implementation of this strategy.

Signed,

1. Prof. Jane Andrew, University of Sydney Business School
2. Prof. Marian Baird AO, The University of Sydney
3. Josh Bornstein, Maurice Blackburn
4. Prof. Mark Bray, University of Newcastle
5. Dr Chris Briggs, University of Technology Sydney
6. Dr. Gareth Bryant, University of Sydney
7. Tim Buckley, Climate Energy Finance
8. Prof. Lynne Chester, University of Sydney
9. Dr. John Clegg, University of Sydney
10. Prof. Amy Cohen, UNSW Sydney Faculty of Law & Justice
11. Prof. Louise Crabtree-Hayes, Western Sydney University
12. Adjunct A/Prof. Lisa Denny, University of Tasmania
13. Dr. Geoff Dow, University of Queensland
14. Prof. Bradon Ellem, University of Sydney
15. Dr. John Falzon, The Australian National University
16. Dr. Frances Flanagan, University of Technology Sydney
17. Prof. Chris Gibson, University of Wollongong
18. Prof. Katherine Gibson, Western Sydney University
19. Prof. Roy Green, University of Technology Sydney
20. Dr. Sidsel Grimstad, Griffith University
21. Prof. Carl Grodach, Monash University
22. A/Prof. Stephen Healy, Western Sydney University
23. Prof. John Howe, University of Melbourne
24. Prof. Llewelyn Hughes, Australian National University
25. Dr. Elizabeth Humphrys, University of Technology Sydney
26. Prof. Kurt Iveson, University of Sydney
27. Dr. Evan Jones, University of Sydney
28. A/Prof. Anne Junor, UNSW Canberra
29. Dr. Svenja Keele, Monash University
30. Prof. Steve Keen, Economist
31. Prof. Martijn Konings, University of Sydney
32. Dr. Declan Kuch, Western Sydney University
33. Prof. Russel Lansbury, University of Sydney Business School
34. Dr. Melinda Laundon, Queensland University of Technology
35. Dr. Emma Lees, University of Sydney
36. Prof. Nick McGuigan, Monash University
37. Prof. Abby Mellick Lopes, University of Technology Sydney
38. Prof. Shelley Marshall, RMIT University
39. A/Prof. Kirsten Martinus, University of Western Australia
40. Prof. John Mathews, Macquarie University
41. Dr Paul Mazzola, University of Wollongong
42. Prof. Paula McDonald, Queensland University of Technology
43. A/Prof. Joanne McNeil, Griffith University
44. A/Prof. Alex Millmow, Federation University
45. Prof. Richard Mitchell, Monash University
46. Prof. Johanna Macneil, RMIT University
47. Dr. David Morawetz, Boston University
48. Prof. Bronwen Morgan, UNSW Sydney
49. Dr. Terri Mylett, Western Sydney University
50. A/Prof. Anitra Nelson, University of Melbourne
51. A/Prof. Anastasios Panagiotelis, University of Sydney
52. Dr. Claire Parfitt, University of Sydney
53. Prof. Neil Perry, Western Sydney University
54. Dr. David Primrose, University of Sydney
55. Prof. Bill Pritchard, University of Sydney
56. Dr. Stephane Le Queux, James Cook University
57. Dr. Patricia Ranald, University of Sydney
58. A/Prof. Stuart Rosewarne, University of Sydney
59. Dr. Darren Sharp, Monash University
60. Cooper Sheather, University of Sydney
61. Dr Christopher Sheil, UNSW
62. Prof. Eric Sidoti, Western Sydney University
63. A/Prof. Ben Spies-Butcher, Macquarie University
64. Dr. Jim Stanford, Centre For Future Work
65. Prof. Frank Stilwell, University of Sydney
66. Dr. Anna Sturman, University of Sydney
67. Dr. Farzana Aman Tani ma, University of Wollongong
68. A/Prof. Amanda Tattersall, University of Sydney
69. Dr. Tim Thornton, School of Political Economy
70. Prof. Elizabeth Thurbon, UNSW Sydney
71. Dr. Emma To, University of Sydney/University of Technology Sydney
72. Dr. Philip Toner, University of Sydney
73. Dr. Erin Twyford, University of Wollongong
74. Dr. Sophie Webber, University of Sydney
75. Dr. Lee White, University of Sydney
76. Lance Worrall, Industry Development Specialist, Adelaide
77. A/Prof. Chris F. Wright, University of Sydney

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