Where have all the engineers gone??

The rise of the bureaucrats was as deliberate as it is disastrous

By Philip Breen

When the Chifley Government, in 1948, decided to implement a scheme to harness the waters of the Snowy Mountains and direct them into turbines to generate electricity, they first set up an authority to design and implement the scheme. They did not appoint a high-flying CEO to lead this venture as would happen today. They sought applicants for the position of Chairman and apparently when the responsible minister, Nelson Lemmon, reported to cabinet concerning a short list of  three, he sent a note to the PM that read, ‘Hudson, Hudson, Hudson’.

And so, New Zealand-born William Hudson, then an employee at Sydney Water Board, became the first Chairman of the Snowy Mountains Hydro Electric Authority, a position he was to hold until near completion of the scheme below budget and on time. He first assembled an engineering design team to create an overall concept, engineers for the detailed designs, engineers to direct the construction and lastly a workforce sometimes numbering over 7,000. He was a Civil Engineer with vision who was able to lead and inspire those who worked under him. The rest is history. Today a Snowy Chairman and CEO are managerial, needing no engineering design or construction experience. A William Hudson Chairman and his Civil Engineer CEO would not have been waiting for the PM to call them about Snowy 2.0. If that scheme does stack up, such an Authority run by engineers would have already investigated and optimised it and put it to the politicians long before now.

In an earlier period, John Bradfield, born in bayside Sandgate, Brisbane, educated at the State Primary and then the Grammar School in Ipswich, went on to study for a Bachelor of Engineering degree at the University of Sydney. Graduating in 1889, his name was to become synonymous with the arguments for and the promotion of various designs for a bridge over Sydney Harbour and the associated roads and suburban electric railways. His plans were described by Sir John Monash as ‘works of exceptional magnitude’. NSW Premier Jack Lang wrote: ‘Bradfield was always thinking of the future, probably the first man to plan for Sydney as a city of two million people’. He lived before the rise of government and corporate bureaucracies that today shut out the innovative and creative, to secure their own positions, in a tiered managerial structure with infinite possibilities for expansion. There is no scope now for the rise of the visionary.

The process of rooting out engineers and forward thinkers from positions of influence, particularly in government bureaucracies at all levels of government, has been gradual but insidious. It did not happen by accident but by design. The forward-thinking, forward-planning, innovative mind is likely to be noticed by superiors, especially by those in a position to have their leadership challenged and they are therefore a threat. Best to sideline and silence  people like that. That has been the task of a born-to-rule, self-serving managerial class for a long time. They are the graduates in arts, law, government, economics, history, philosophy, the social sciences and the like. This is not to downplay the worth of these callings, but as a class they see themselves as an intellectual elite born to reign supreme in the bureaucracies. They are dismissive of the creative and inquiring minds that constitute the derisively-labelled STEM callings whom they have subdued and lord over to effectively silence them. STEMs are banished into small groups handy to be consulted by superiors in an emergency, as one would the plumber for a leaking tap.  Well, you may say ‘this is too much, this fellow is completely over the top’. Not so, let me illustrate, with the tragic case of the rapid dismantling of the superbly efficient Queensland Public Service.

Queensland only became a self-governing colony in 1857, yet its governments led the nation in many spheres. Public servants’ super was fully funded from the start. Debt-free public hospitals provided free means-tested care long before Medicare. From its earliest days Queensland put engineers in charge of a majority of state departments in a lean and efficient public service nurtured by Labor, from 1915 to 1957 (apart for 3 years) and passed on to the National/Liberals who left it unchanged in governance till 1987.

That year Wayne Goss became Premier allowing Kevin Rudd BA and his friend Peter Coaldrake BA, lecturer at QIT, both political ex-staffers, to set about dismantling the public service. That service built up caringly over more than 100 years had just seen Queensland, the only state to come through the 1987 stock market crash with flying colours. Till then engineers occupied the leadership roles in all the infrastructure departments, including Coordinator-General of Public Works, Main Roads, Railways, Irrigation and Water Supply, Electric Power, Mines, Harbours and Marine and Local Government engineering. Soon they were all gone, replaced by federal look-alike and greatly expanded departments, said by Coaldrake to be a required cultural (wow!) reform, but judged by astute observers to be a text book driven frolic. Goss in retirement apologised for this wanton vandalism. The new managerial class, now entrenched, knows nothing of the skills required for pre-planning within government to achieve efficient infrastructure, delivered at economic cost or of planning for operation, maintenance and future upgrading. Everything is ad hoc. The results have been disastrous. I rest my case.

Now governments’ work goes to Australian engineering consultancies, admittedly offering services of the highest order of skill and competence, but they do not provide long-term planning which is the job of government. Margaret Thatcher visiting Japan to witness their economic miracle post-war, noted that engineers were in charge at all levels of government and industry. No doubt that is largely true of powerhouses like Japan, South Korea, Taiwan and China today. Those who like to categorise engineers as unlettered nerds, unsuited to lead a bureaucracy, might dwell on the words of René Descartes, the 17th century philosopher: ‘Mathematics is a more powerful instrument of knowledge than any other bequeathed to us by human agency.’

Australia’s current malaise (especially the energy fiasco) could be remedied if we had leaders of the class of Ben Chifley and his minister Nelson Lemmon, in the Commonwealth and the states, to seek applicants to transform the public services into far-sighted and constructive organisations. They would wisely choose engineers experienced in design and construction to do that job.

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Verner in the AMTIL magazine

The Victorian Vernier Society is showcased in the latest magazine

Click here or on the image to read the article


May’s Briefing

Our presentation from the May meeting. Click on the image to open up the PDF of the talk.

Grattan Report – Budget Policy and Institutional Reform

Protest politics is on the rise in Australia, and the main cause is collapsing trust in politicians and the major parties, according to Grattan Institute’s latest report, A crisis of trust: The rise of protest politics in Australia. At the 2016 federal election, votes for minor parties hit their highest level since 1949. More than one-in-four Australians voted for someone other than the LNP, ALP or Greens in the Senate, and more than one-in-eight did likewise in the House of Representatives.

If the major parties and politicians want to rebuild trust with voters, they’ll need to change the way they do politics, explain Budget Policy and Institutional Reform Program Director Danielle Wood and Associate Carmela Chivers in this podcast discussion.

It will be a slow process, write Danielle Wood, Carmela Chivers and Grattan CEO John Daley in The Conversation. Reforming political donation laws and tightening regulation of lobbying and political entitlements could help reduce the incidence of trust-sapping scandals and reassure the public that the system is working for them. Politicians should also seek to dampen rather than inflame cultural differences, by stressing the common ground between city and country and between communities with different backgrounds.

Federal Labor has announced it will abolish cash refunds when investors, such as retirees, who pay little or no tax get dividends from companies that have paid company tax. It’s not first-best comprehensive tax reform, write Danielle Wood, John Daley and Grattan Fellow Brendan Coates in The Conversation. But in the absence of that holy grail, it is a piecemeal move towards a more equitable tax system that collects enough revenue given current spending commitments.

Scott Morrison says the policy will mainly hurt low-income earners. He says that 54 per cent of people affected by Labor’s policy have taxable incomes of less than $18,200, and that 86 per cent of the value of all franking credits refunded are received by those with taxable incomes of less than $87,000 a year. But these claims are deeply misleading, write Danielle Wood and Brendan Coates in Inside Story, because taxable income ignores the largest source of income for many wealthier retirees: tax-free superannuation.

The reporting of the Labor policy and earlier policy debates around negative gearing shows how easy it is to mislead Australians about who loses from tax changes. The full range of tricks used by vested interests and political combatants to scare and confuse was on display, write Danielle Wood and Brendan Coates in The Canberra Times.



Read the Full article here

Grattan Report – Housing Affordability

Re-imagining the Australian Dream

Building an extra 50,000 homes a year for a decade could leave Australian house prices 5 to 20 per cent lower than they would be otherwise, and stem rising public anxiety about housing affordability, according to a new Grattan Institute report, Housing affordability: re-imagining the Australian dream.

Within living memory, Australia was a place where housing costs were manageable, and people of all ages and incomes had a reasonable chance to own a home with good access to jobs. But home ownership rates are falling among all Australians younger than 65, especially those with lower incomes. Owning a home increasingly depends on who your parents are, a big change from 35 years ago when home ownership rates were high for all levels of income. Those on low incomes – increasingly renters – are spending more of their income on housing.

It’s been a perfect storm of rising incomes and falling interest rates, rapid migration, tax and welfare settings feeding demand, and planning rules restricting supply. As a result, house prices have more than doubled in real terms over the past 20 years. The strains are most acute in Sydney and Melbourne. Since 2012, house prices have risen 50 per cent in Melbourne, and 70 per cent in Sydney.

Development in middle suburbs has increased in recent years, especially in Sydney. But today’s record level of housing construction is the bare minimum needed to meet record levels of population growth driven by rapid migration. Meanwhile a decade of accumulated shortages are forcing younger people to set up their own homes later in life.

To build more homes, State governments should fix planning rules to allow more homes to be built in inner and middle-ring suburbs of our largest cities. More small-scale urban infill projects should be allowed without council planning approval.

State governments should also allow denser development ‘as of right’ along key transport corridors. They should swap stamp duties for general property taxes. And state land taxes on investment property should be flat rate with no tax-free threshold, to encourage more institutional investors likely to provide longer-term tenancies.

The Commonwealth government can improve housing affordability somewhat – and immediately – by reducing demand. It should reduce the capital gains tax discount to 25 per cent; abolish negative gearing; and include owner-occupied housing in the Age Pension assets test. And unless the states are prepared to reform their planning systems, the Commonwealth should consider tapping the brakes on Australia’s migrant intake.

It took neglectful governments two decades to create the current housing affordability mess. They preferred the easy choices that merely appear to address the problem. The politics of reform are fraught because most voters own a home or an investment property, and mistrust any change that might dent the price of their assets. But if governments keep pretending there are easy answers, housing affordability will just get worse. Older people will not be able to downsize in the suburb where they live, and our children won’t be able to buy their own home.

Read the full report here

Barker Trailers latest company to join the Vernier Society

The Vernier Society are pleased that Barker Trailers have joined the Society as “Gold Members”.

Barker Trailers Logo

Another long established Melbourne family firm with Acting MD Scott Barker, sees the benefit of the Society for networking, a great monthly speaker program and the opportunity to spend more time working ‘on’ the business, rather than ‘in’ the business and sharing collaborative knowledge with other members and friends of Vernier.

Read more about Barker Trailers here


November 2015 Newsletter

That was the month that was….

News both local and international that you have missed

  • China and Australia’s Manufacturing figures
  • Digital Workforce in Australia
  • Put more women on boards
  • No economies of scale for cars or defence equipment
  • ABB has launched its YuMi collaborative robot in Australia
  • Shambolic Training has to go
  • USA Study – Companies drive wage inequality
  • Luxury car maker Ferrari valued at $13.5bnAus in US float
  • Electric car maker Tesla posts loss
  • Banking – Credit Suisse to cut 2000 jobs
  • Kraft Heinz to axe 2600 in rationalisation
  • Science – the brightest light in the universe

Read All About November’s News Here

September 2015 Newsletter

That was the month that was….

News both local and international that you have missed

  • Toyota looks to bring artificial intelligence to driverless cars
  • Reports confirm Vernier’s 2014 findings
  • Global Innovation Index for 2014
  • Wastech adds Tieman Tail Lifts to acquisition
  • Ronson’s new machine gives greater capability for global aerospace
  • New organisation to help car component makers
  • 99 Melbourne shipbuilding workers lose their jobs
  • Technical skills not enough
  • Import duties hold back high-tech companies
  • Boral sues CFMEU over black ban
  • Small business confidence on the rise
  • Appen at forefront of machine intelligence
  • VC’s aim for the stars with ‘Frontier Tech’

Read All About September’s News Here

The AME and Professor Samson identify innovation as the “Ultimate competitive Advantage”

The Vernier Society was represented last night at a dinner hosted by the ‘Association of Manufacturing Excellence (AME) Australia’; an organisation, albeit somewhat larger, with the same passion for the sustained future of Australian manufacturing as the Vernier Society.


The excellent evening was held in Port Melbourne where the guest speaker was Professor Danny Samson of Melbourne University who gave an insightful speech into his current research on Innovation across Australia.  Professor Samson’s (“just call me Danny”) research has covered 2000 companies who completed a 150 question survey to determine how the companies approach innovation; not just in the traditional product development function but across the whole organisation.  Danny and his team are now analysing the mass of data collected and he gave the AME a snap shot of the first results, demonstrating that when innovation is successfully applied across the whole organisation, it can result in up to 30% improvement in bottom line performance.

Danny’s work identified a matrix of 9 areas of performance that benefit from a more innovative approach:


  • Strategy and Leadership
  • Human Resources and Training
  • Culture and Communications
  • Customer focus
  • Embracing risk and change
  • Sustainability focus
  • Management of innovation and processes
  • Knowledge and Technology (IP)
  • Operations and Partnerships

By analysing the data into the top 25% of companies who lead in innovation against the bottom 25% of respondents who lag in innovation, Danny articulated to the audience through a series of graphs how this volume of data can be mined to identify gems of learning that justify the shibboleth of “Innovation as the Ultimate Competitive Advantage”.  The presentation and the Q&A session that followed clearly demonstrated that there is a lot to be understood and learned from Danny’s work and so it was not surprising that most of the guests left their business cards to get a copy of the initial report, which is sure to be a tempter to a whole series of learning reports.

The evening was concluded with an informal networking session and left the guests appreciating the work of the Victorian Chapter of the AME in setting up this fine evening at the equally fine Mardos Restaurant, but most importantly the need to continue the fight for manufacturing leadership in this country and the important role that the AME, the Vernier Society and Innovation must play in this mission.

Engineering & Manufacturing Influence News – Issue 14 August 2013



Thank Goodness it is over with; no more of those tedious and destructive adverts for political parties in a campaign that must be looked back upon in time as the lowest point in Australian politics. Read more

Engineering & Manufacturing Influence News – Issue 13 July 2013


The message from the last 12 newsletters has been that manufacturing continues to decline with regular reporting of factory closures and moves offshore.  Underpinning this has been the losses in the automotive sector culminating with the 2016 closure of Ford and the continuing rhetoric from Holden that reduced labour costs are essential to any kind of future.  It is uncertain whether the recently announced additional funding is the right action and so this month we ask members for their views through a simple survey on what should happen to the car industry so that we can form a comprehensive Society view.  Another strong theme throughout the last year has been the need for manufacturing to innovate and focus.  Featured in the last edition was the Manufacturing Monthly’s Endeavour Awards that demonstrated how  some companies are rising to this challenge and this month’s companies news continues this success with companies like Joy Global, Leviathan Design and Thales showing innovative ways of fighting for a new manufacturing future.

Often, when economists and academics talk about the challenges of the economy, their words are couched in specialist, obtuse language that is just as confusing, so it was good to hear Warwick McKibbon, Professor of Economics at ANU explain on ABC’s “Lateline” (6th of August) what is wrong with current policies.  Without taking a political stance, (which VVS also tries to do), he explained academic’s role is to point out poor policies and there has been more of these in the last five years of government.  Speaking primarily on the just announced rate reduction he argued that this shows the economy is weak and the RBA is really trying to correct for wrong policies.  The basic problem is that the country has high ‘input’ costs in energy, labour, regulation and environment controls; in addition the political uncertainty, as well as the adjustment in the resources industry is adding to the slowing economy.  We are simply a too high cost economy.  What rate reductions only do is cause people to save more (the retirees who rely on savings) and cause fixed income people to become poorer.  There is political incoherence with random policies and changing regulations adding to uncertainty and reducing risk taking.  If businesses and therefore people are successful their taxes go up.  McKibbon said there is a real lack of vision for real infrastructure improvement that raises productivity.  While China’s growth is changing; incomes in China are still only 15% of the US and still offers opportunity.   There is too much regulation, not just in IR but in the environment.  There needs to be greater flexibility in the labour market and a reduction in the Federal and State bureaucracy to free up the economy to take advantage of the global market growth.


Paul Gollon of Macquarie University writing for the ‘Conversation’ reports that one year on from the ‘Fair Work Act’ review, many of the 53 recommendations have still to be implemented.  The system was said to bring in a more collaborative workplace but has not brought the required results, despite union rhetoric to the contrary.  According to the ABS, in 2007 there were 135 disputes that resulted in a strike and in 49,700 working days being lost.  In March 2013 the number of similar disputes has reached 218 with 289,500 working days being lost.  This is despite union membership being at only 13%.  One blogger responded to suggest that it is almost impossible today to ‘performance manage’ employees out and even if this is achieved, the likelihood is that they will, using the abundance of ‘no win – no fee’ lawyers, tie the company up in expensive litigation.  The blogger suggests this is leading to an increasing reliance on casual labour where the structure is not so punitive to employers.

A recent report by the Grattan Institute (CEO John Daly spoke to the Vernier last year) suggests that the country’s manufacturing sector has performed with resilience through the mining boom, worth $400b in the last decade and will benefit from the reduction in exchange rates that occurs at the end of a resources boom.  The study based on 16 countries whose exchange rates came down at the end of their resources boom and found that “within 3 years, manufacturing exports on average as a share of GDP had risen by more than a third”.  However, the report has been treated with some scepticism in other quarters, suggesting that once a manufacturing sector dips below 5% of GDP it is lost forever.

The ‘West Australian’ reports that the Chairman and MD of Alcoa Australian, Alan Cransberg has said that Australia’s industry has become “fat, lazy and happy about the fact that we are good at digging holes’.  He said that the cost of doing business in Australia was a major concern.  His comments were made as research was released that showed Australia’s unit labour costs had gone from 85% of the USA in 2000 to 241% today.  Alcoa’s Victorian smelters are under review as Port Henry and Portland sites are among the countries most expensive.

A report in the ‘Australian’ suggests that China’s labour costs will overtake US by 215 and Australia’s productivity decline in manufacturing is even more pronounced.  While in 2000 china’s labour costs were 30% of the US this advantage is quickly being eroded with US manufacturers taking the advantage of cheap shale gas to “reshore”.  China’s wage growth is creating an increasingly consumptive Asian middle class predicted to increase from 600m in 2010 to a billion by 2015.  This increase in China will drive the need for low cost manufacturing to other ASEAN countries like Thailand and the Philippines as well as Bangladesh and Pakistan. .

According to an RMIT-MGI survey, the percentage of manufacturers in family business is contracting noticeably.  A decade ago manufacturers made up 40% of all family businesses but there has been a sharp decline to around 20%, according to the latest survey, driven by the GFC. In addition, the Business Spectator is predicting that manufacturing employment will continue to decline but will focus either on high technology products or products that are too hard to bring in from overseas like bricks and beer.

At a recent Leaders Summit in Melbourne, Austrade’s Philip Bourke told the audience that Asia poses both a threat and a significant opportunity to Australian manufacturers.  By 2025 it is estimated there will be 2 billion people living in urban areas (about 50% of the world’s population) and about 50% of these will be living in Asia.  This will transform Asia, increasing their desires for mobility, health, food, leisure, infrastructure and education.  Bourke argued that Australia still has a place in terms of value add technology and the design of higher end goods.  “At Federation, Asian trade with Australia was less than 10 per cent of our total trade; now it’s about 70 per cent and Asian countries make up eight of our top ten major trading partners,” he said.  In line with Labor’s Asian Century Whitepaper in October pointing to innovation in advanced manufacturing, and assisted by a transformation of organisations like Austrade, Australia is in the right place at the right time, moving from the tyranny of distance to the power of proximity.  “Austrade is in 15 countries; have 11 officers in China and 11 in India,” he said.  Recently, Austrade has also opened offices in Mongolia and Western China to support mining, manufacturing and other penetration opportunities into those growth areas.  But he warned that is Asia is not one market; its many markets and all are different.

Reuters reports that the British manufacturing sector recorded its best monthly result since March 2011, and China also registered growth in July.  The July Markit/CIPS PMI survey gave an overall result of 54.6 for July, following June’s 52.9.  Any result above 50 indicates growth, and below it reflects contraction.  While at the same time Australia July index has fallen to 42% falling June’s figures that had risen close to parity.

The British newspaper the Telegraph reports that increasing numbers of British businesses are looking to bring their manufacturing operations back home from overseas. This trend is emerging as labour costs in Asia are rising and the latest consumer tastes require shorter, more flexible supply chains.  This push is supported by local business leaders lobbying for increased government support.  Business leaders are pushing for more local production and suggesting that import substitution is just as important as growing exports.  This view is endorsed by an increasing campaign to “Buy British”.


Futuris, the Victorian based but global car seat manufacturer and presenter to Vernier earlier in the year has now been sold to California based Clearlake Capital for an estimated $69m.  Clearlake currently manages approximately $1.4 billion of equity capital, and Clearlake’s founding principals have led over 70 investments totalling more than $3 billion of capital in sectors including business services, communication, consumer products/retail, defence/public safety, energy/power, healthcare, automotive, industrials, media, and technology.  Dexter Clarke who presented to VVS has just been promoted to the company’s Chief Financial Officer.

JOY Global, manufacturer of Mining Machinery has just opened its first Australian remote access facility on the University of Wollongong’s innovation campus.  This facility allows the company, through large Video wall screens to track all of the company’s data on their actual equipment at the mining sites and will house all Joy’s sales and service information.  Wollongong was chosen because of their links to major mining corporations.  Joy global see mutual benefit in R&D collaboration with the University and increases their ability to attract graduates to the industry; as well as providing a modern and stimulating environment for their team.

Editor’s note – This proves the value of collaboration and of the merits of proposed Innovation Centres.  

Melbourne Company Leviathan Design has designed manufactured and installed a complex cell of 7 ABB robots to bond metal trim and plastic columns to a glass panel to form a door outer assembly used in free standing household cookers manufactured in Adelaide by Electrolux in 14 seconds.

Editor’s note – another Victorian company I have never heard of before, based in Rowville – have a look at their quite novel website.

Launceston-based car parts manufacturer ACL Bearings will be closed by receivers by next June with 136 workers eventually losing their jobs.  ACL has been operating under receivership since 2009 when 110 workers lost their jobs and since then the workforce has reduced by a further 55 people.  ACL Bearings supplies components such as engine bearings and gaskets to the automotive industry and exports around 75-80 per cent of its products.

Archer Enterprises, a maker of precision stainless and titanium components to fine tolerances have been commissioned by Green energy company Granite Power to produce the front end assembly for their Waste Heat Recovery demonstration model, impulse turbines after Archer assisted Granite Power with the original design.  Archer based in NSW and in business for over three decades are a one-stop provider of fail-safe performance-critical products to global OEM’s and market leaders concerned with safety, asset protection and critical/essential-service applications.

Carbon Revolution, (formally CFusion) who has made “the world’ first one-piece carbon fibre wheel” a leader in this technology, want government assistance to invest in a new facility in Geelong.  The facility would create an extra 300 jobs by 2017 and add to their existing plant at Waurn Ponds.  The more expensive high performance wheels are 40-50% lighter than aluminium and offer according to the Deakin university between 3 and 8% reductions on emissions, were developed using a previous grant of over $1.8m through the Federal governments Green Car Innovation Scheme.  Switzerland’s Ronal Group, who make light alloy wheels and shower enclosures, has a minority stake in the company.

 Military vehicle manufacturer Thales Australia is to offer Victorian manufacturers opportunities to play a role in the manufacturing of the company’s Hawkei protected vehicle.  Around 20 SMEs, many from Victoria, met with Thales representatives to discuss options for the manufacture of the Hawkei’s fabricated sub-frame, vehicle components and assemblies.  Thales is segmenting the Hawkei supply chain work into around 30 major work packages. The company wishes to join with suppliers who can work in partnership with the company to meet specific quality, cost and technical requirements.  The work packages to be offered include work related to HVAC systems, Pneumatic systems, Hydraulic systems, Bonnet assembly, plastic components, and power pack dressing.

And finally, a Shakespearean thought from the Editor on return from the motherland.

What irony, as in my absence as I stood before the Tower’s famous Gate, a colonial Queen was executed; oh how Machiavelli turns in his grave.  The resurrected black Prince is robbed of a bloodstained, vengeful sword as minister’s with unusual integrity, fall on theirs.  A new army is formed from depleted ranks, why even the minstrel Cameron is recalled to the fight.  But surely, the might of the enemy cannot be withstood.  Nae, can this modern day Henry V recreate a political Agincourt as “his few, his happy few, his band of brothers (and now to be politically correct sisters) and ne’er so vile, shed their blood”?  Yet only two days in I cry; “that he which hath no stomach to this fight, let him depart, his passport shall be made”.  Flee, fly, drive, set sail, I say for anywhere; why even PNG by boat seems more appealing than the next month in Australia!

Engineering & Manufacturing Influence News – Issue 12 June 2013

ISSUE 12, May 2013


This edition, issue 12, of the Vernier Newsletter signifies a year for the society attempting to promote the message that a vibrant manufacturing industry is vital to the future of Australia.  In the first edition the editorial subject was the introduction of the carbon tax.  12 months on it seems it has neither lived up to the doomsday predictions of the Coalition nor been the revenue raiser that justified the associated tax changes outlined by the Labor government.  At the ABC Press Club this week, Greg Combet laid out the argument for Labor’s policy on climate change being a roaring success and decried Tony Abbott as a complete climate change sceptic.  There seems no doubt that the world’s climate is changing and as the majority of scientists believes carbon to be the main source of pollution we cannot stand by and do nothing.  At the same time and equally important the world is running out of traditional energy sources so this alone should justify action.  However, the problem seems to be that all the information is spun to create the maximum political effect.  Take Minister Combet’s presentation.  Emissions from electricity generation have dropped 7.4% over 12 months seems impressive at first glance but what does this exactly mean?  Does it mean that this can be used as a trend and so electricity will be pollution free in 20 years?  And all this reduction came about in the last year because of the introduction of the carbon tax?  Researching the confusing information on total electricity generation it seems that total production since 2000 has risen nearly 20%, so the emission reduction does not even keep up with increased pollution.  Then there is the new wind farm built in Victoria with all the manufacturing in Australia according to the minister.  The turbines are produced by a Danish company Vestas, who do have a facility in Australia but as far as research shows, it is on level 12 in a building in St Kilda Road – seems a difficult place to manufacture such large components?  Then renewable energy is up 30% but 30% of what?  Research suggests it now provides 9.6% of total production.  Pleasing that it has increased by 3% absolute but comparing relative and absolute demonstrates how facts can be spun.  The success of AJ Bush’s project must be pleasing for them but did they not realise before that methane gas was being produced or could or would they not fund the project without grant assistance?  Either way the provision of grants for alternative energy projects seems eminently sensible, so there should be some concern over the coalition’s plans to scrap the whole program but will we get the truth from either party?

Talking of truth; this month saw the inevitable announcement of the closure of Ford manufacturing.  The newsletter does not feature any of the facts of this as it has been covered in separate Vernier articles specifically on the automotive industry. The question is though – how long has the government really known about the inevitable closure of the plant?  It is unimaginable that Ford had not made their intentions clear to the government several years ago and the anecdotal evidence from third parties is that there have been implicit signs in Ford’s behaviour for a long while now.  Secrecy was not unexpected and even the timing of the announcement can be seen as political but the interesting role in this is the one of the unions.  Are they not now just another political party as the new set of electoral advertisements shows?  The political aspirations of Kerney and Howes would seem to testify to this fact.  The role of the unions and their hold on the Labor party is certainly not good for the country and the latest bill (see below) has been passed takes industrial relations back to the 1970’s.  It will be fascinating to hear next month’s speaker on industrial relations because the power of the unions is absurd and something has to change if we are realistically to compete in this globalised world!

Finishing on a bright note; it was good to attend the Manufacturing Monthly’s Awards Dinner that coincided with Austech last month.  While the show’s attendance numbers reflected the declining state of Australian manufacturing, the dinner at least showed that there are quite a number of Australian companies who can produce excellent results. It shows that once the inevitability of globalisation is accepted, Australian manufacturing companies that demonstrate hard work, innovation and most importantly good leadership can succeed, even in an economy burdened with over regulation, excessive taxation, low productivity and high wage rates.  Good on you Aussie companies!

Monthly news

Manufacturing Monthly Endeavour Awards

Congratulations are in order to one of our latest members and co-founder of ANCA as the company not only took the “Exporter of the Year Award” at the recent Manufacturing Monthly Award Dinner but the top prize of “Australian Manufacturer of the Year”.  Many who were at the dinner and know ANCA see this as the justified culmination of many years work growing the Bayswater based CNC grinding Company into an international leader in its niche market.

On the night a total of 14 awards were presented to Australian manufacturers following a keynote speech from Sue Morphett of Manufacturing Australia who endorsed a proposal originally raised by Dow Chemical boss Andrew Liveris and reported previously in the Vernier newsletter that the federal government should allow industry to access the nation’s abundant gas resources at competitive prices to negate the expected rise of international natural gas prices.  One of the most pleasing issues of the night was that many of the awards seem to be won by companies who clearly saw innovation as the driver for success rather than let gloom and defeatism overwhelm a total industry struggling to transition to a new global manufacturing economy .  This fact was endorsed by opposition Industry spokesperson Sophie Mirabella who said there are no silver bullets and it needs a lot a lot of hard work ahead to turn manufacturing around.

Expert questions value of automotive industry to wider manufacturing sector

A former Vernier Speaker and past Chairman of the Automotive Industry Authority in the Hawke/Keating government Bill Scales, in an opinion piece in the AFR headlined by “Government must step back from manufacturing’s ‘death spirals” argues quite rightly that Ford’s strategy over many years to focus predominantly on the Australia/NZ market was never going create the volumes necessary to sustain automotive production in this country and so it should have been no surprise when Ford announced its closure.  He further posits that this is a good example for public policy in Australia in that governments should not provide company or industry specific assistance as it cannot guarantee that the strategic direction or intent of the government cannot be guaranteed to be in concert with the individual or company strategy.  Scales goes on to say that ‘we’ should not introduce policies that imply that some industries are better than others for our economy.  “There is no logical reason why the manufacturing elements of the automotive industry are more important than mining, tourism or the arts”.  He further argues that the so-called ‘positive spill offs’ from vehicle manufacturing on the rest of manufacturing and the broader economy as a whole are illusionary.  He concludes that if governments really want to help industries compete in this complex world; we need sound fiscal and monetary policies; labour markets that operate efficiently, a world class education system and world class social and economic infrastructure.

While this conclusion cannot be disputed, some of the previous points are certainly debatable.  70% of the world’s tradable goods are manufactured.  Many improvements in the quality of life are driven by innovative manufacturing, one only has to look at the advances in automotives to justify that point.  Infrastructure transports vehicles and the futuristic views are of guided vehicles, cars that fly, robots that perform daily tasks – these are the leading edge innovations of the promethean future.  There are several leading industries that will drive the future and an automotive industry is clearly key to many countries.  But investment has to be in an industry of the future, not the current strategy model displaced by Holden.  In addition, world class companies do create positive spill offs.  Swinburne University, of which Scales is Chancellor, leads in lean manufacturing training built upon the philosophies and methods derived from Toyota, probably the world’s leading manufacturer in efficient manufacturing.  There are industries that are vitally important and manufacturing – the process of making things – is absolutely one; just as tourism, the arts and education are equally vital.  Surely, it is the role of government to invest in key industries for the future but this investment has to be to support a well thought out future not as currently for political purposes.

Climate Change – one year on

The Minister for Climate Change, Innovation and Industry, Greg Combet addressed the ABC Press Club this week to report on the “Clean Energy Future – one year on.” Before turning the presentation into somewhat rambling and slightly desperate party political broadcast complete with the usual scathing attack on the coalition party policies, Mr Combet did manage to give some facts on the Australia’s position and the success of its implementation.

  • Australia is the 12th largest economy and the 15th largest polluter in more than 190 nations as well as the largest polluter per capita among advanced nations.
  • Emissions in the National Electricity Market are down 7.4%
  • Renewable energy generation is up almost 30%;
  • Generation from Australia’s seven most highly-polluting power stations is down by 14 per cent.
  • The Clean Energy Council estimates that 24,300 people were employed directly in Australia’s renewable energy industry at start of 2013
  • Top 370 companies in Australia have to have a permit for every tone of emission they produce.
  • AGL opened MacArthur Wind Farm in Victoria, largest in southern hemisphere – saves 1.7m tones of greenhouse gas emissions every year – $1b investment – all 140 wind towers were manufactured in Australia
  • More than 1m households have installed Solar systems under Labor’s scheme compared to only 7,472 rooftop solar systems in 7 years under Howard Government.
  • More than 220 clean technology projects are now underway at manufacturing plants under clean Technology Investment Programs – involve $338m of investment
  • Example – AJ Bush and Sons, one of Qld largest meat industry employers invested $12m to capture methane previously released into atmosphere.  This has cut energy costs by 46% and emissions by 64%.

Independent’s kill off Labor’s IR changes

The AFR (5 June) reported that independents Rob Oakeshott and Tony Winsor declared they would not support the controversial IR changes proposed by Labor’s Bill Shorton.  These included plans to reintroduce limited arbitration for deadlocked Greenfield resource projects.  The MP’s agreed only to support the family friendly parts of the bill and did not want to get in the middle of an election stoush as the Liberal’s formally opposed amendments to strike out provisions to designate employer lunchrooms for meetings between workers and unions and the provision that would have made the employer responsible for the costs of transporting union officials’ to remote sites as well as proposals to see bullying complaints referred to Fair Work Australia.  The BCA CEO Jennifer Westmacott had said that the independents were right to knock back amendments that “would have wound the clock back 30 years”.  Postscript – Astonishingly the following day 6th AFR reported that following amendments the bill had been passed with support of the independents.  This means that union meetings will be held in lunchrooms even though the vast majority of the workforce using the room may not be members and employers will be responsible for union costs to get to isolated sites!

Unions Advertising Campaign

At the same time the AFR announced a series of adverts to be ran by the ACTU starting with the State of Origin Rugby broadcast in the lead up to the general election that would focus on a campaign against ‘insecure work’ such as part time and casual jobs and short term contracts.  The ACTU Secretary has refused to say how much the ads would costs but said it was substantial.  The affiliated unions are already running a $2 levy on members in the run up to the elections, which is expected to raise $4m.  The theme, which is bound to be controversial and run close to the rules for election advertising, is said to be focused on employers and underpins a message of the unions standing up for a better life for all workers and their families.

News in brief:

  • The AIG’s Performance of Manufacturing Index, which is a summary of 200 companies rose in May to 44% compared with the April figure of 37% but as the index works on a nominal score of 50 as the line for expansion or contraction this score records the 23rd consecutive month of contraction.
  • The AFR ran an article showing that US manufacturing activity has shrunk to a four year low.  It stated that manufacturing is really stymied by slow corporate spending and government spending cutbacks.  The article claimed that manufacturing will grow at a modest pace this year but is unlikely to accelerate in the coming months.  Figures were released last week that showed US GDP rose 2.4% annualised for the first three months of 2013.  At the same time MM reported that China’s manufacturing index for May had reduced slightly from the previous months figure and was just showing a slight contraction of purchasing managers confidence.  However, in a separate report the NZ manufacturing index actually rose into positive territory in May perhaps boosted by the decline in the $ assisting export orders
  • Panasonic the Japanese conglomerate has announced the reduction of 5000 jobs from its Automation and Control division.  The cuts which will be largely from its overseas facilities are said to be as a direct result of the company making a near $Aus 8b loss last year which is said to demonstrate the increased competition the company is facing in its core markets as well as the costs of its recent purchase of Sanyo.  While Panasonic has shed around 20% of its workforce in recent years it still employs over a 111,000 in its automation division and a total of 293,000 across the whole company.
  • “Australian Made” has announced a new website and product directory that features thousands of Australian manufacturers.
  • The “Victorian Carpet Company”   based in Castlemaine Victoria has announced it will close with a loss of 21 jobs.  This follows last year’s reduction when the company shed over half its workforce.  The CEO said it was a continuation of manufacturing moving offshore in the industry.
  • There has been adverse reaction from the major gas companies Santos and Origin to the proposal by Manufacturing Australia to reserve gas, at competitive prices for domestic use.  The idea has also received scant support from the government.  The argument put forward is that the gas would remain in the ground  – talk of slowing the industry will slow the economy.
  • Boart Longyear has slashed over a 1000 contract mining jobs in reaction to the downturn in capital and mining exploration spending globally.  These losses reflect the continued downturn in the mining industry sector a spokesperson said.
  • MM reports at least one Labour MP wants to re-introduce tariffs to protect the Australian automotive industry.  The MP who seat covers Holden’s SA plant suggests that the high $ requires special attention through the reintroduction of temporary tariff measures.