The Labour Government’s “Plan for Australian Jobs”.
The Prime Minister has announced the promised “Plan for Australian Jobs” that follows the report of the Non – Government Taskforce issued in September of last year. The PM announced the plans at a visit to the Boeing Facility in Melbourne, one of the few successes of component manufacturing still remaining in Australia. Said to be a $1b investment in the future of manufacturing jobs in Australia, the heavily repetitive document, seemingly more desiring of volume than articulation, has received a rather muted response in the national press and from the opposition. This paper outlines the major initiatives in the plan and then critically examines whether these actions are going to achieve the rejuvenation in manufacturing that is still essential to Australia’s future prosperity.
Reminder of the Taskforce findings:
- Meeting current pressures by helping with investment and industry participation, to reduce the risk of loss of jobs and core manufacturing capabilities.
- Lifting productivity growth and reducing business costs via economy-wide proposals in transport infrastructure, broadband, energy, regulation and taxation reform.
- Improving the benefits flowing to Australian manufacturing from our research investments including through a new platform for systemic collaboration with innovation hubs and stronger networks.
- Building a cohort of medium sized world competitive firms and improving SME competitiveness through a new SME Strategy that targets SME capability.
- Forging of a shared competitiveness culture through a new national partnership for workplaces, focused on the capabilities of managers and workers.
In line with recent rhetoric from the government, the paper outlines that creating and supporting jobs are the central objectives of the government’s economic policy and through this plan $1b will be invested in productivity, prosperity and jobs.
The three main policy frameworks of the plan are:
- Backing Australian Firms to win more Business at Home
- Supporting Australian Industry to win new business abroad
- Helping Australian Industry SME’s to grow and create new jobs
It is said that these policies will complement the 5 pillars of productivity identified in the ‘Asian Century’ paper of skills and education, innovation, infrastructure, tax reform and regulatory reform.
1. ‘Winning more work at home’
The main actions are the introduction of a new ‘Australian Industry Participation Authority’ that will be established to help firms seeking work on large domestic projects and in global supply chains. In addition, they will legislate through a new Australian Jobs Act to extend Australian Industry Participation (AIP) to give fair chances to Australian firms. All projects with capital expenditure of $500m plus will be required to implement AIP plans as to how Australian firms are to be given opportunities to win appropriate work. For projects above $2b that applies for concessions, they will be required to embed AIP Opportunity officers within their procurement teams. It is believed with these actions of enhanced industry participation, productivity and growth through building scale will increase competitive advantage. According to the costs summary table, this part of the initiative will cost $98.2m although it appears the current expenditure is already $58m and so additional expenditure will be $40.2m. (Author’s note: apologies that sum of these allocations may not be totally correct but the report’s figures are not easy to interpret).
Strengthening Australia’s Anti- dumping laws – $27.7m will be invested in a new system for investigating and applying remedies where dumping is injuring local producers.
Improve management and workplace skills with a $12m investment over 4 years to establish the ‘Centre for Workplace Leadership’. This not for profit entity will demonstrate how effective leadership is critical to workplace productivity.
2. ‘Supporting Australian Industry to win new business abroad’
The three main initiatives in this framework area are:
‘Industry Innovation Precincts’
Creating up to 10 ‘Industry Innovation Precincts’ to drive collaboration and innovation in areas where Australian firms can globally compete. The precincts will be business led and focus on areas of scale competitive advantage and emerging opportunities and networked nationally through a new ‘Industry Innovation Network’.
The precincts will be governed by industry led boards with representatives from business, the research sector and others including service providers who can provide advice and assistance in certain areas. The precincts will have flexibility in the projects and services they deliver. A competitive ‘Industry Collaboration Fund’ (with funding building to $50m/year) will be administered by a new ‘National Precincts Board’ which will have at its power additional funding options. Firms located nationally will benefit from the precincts activities through a national technology platform, ‘Industry Innovation Network’ and through ‘innovation Brokers’ who will link industry with researchers and business services. The first precinct announced is the ‘Australian manufacturing and Materials Precinct’ at Clayton, Victoria (AMMP) which embraces the Synchrotron. The second one is the private Kraft lead food precinct headquartered in Melbourne. The total expenditure announced on Precincts is $504.4m with $238.4m allocated to the precincts and $236.3m allocated to ‘Industrial Transformation Research Programs’ (ITRP), which are research grants administered under the Australian Research Council (ARC)
Providing new support for SME’s with high-growth potential in such precincts through ‘Growth and Leadership Development’ (GOLD) initiative where potential high growth firms will be offered advanced integrated services as a ‘one-stop shop’. The service will be delivered by Enterprise Connect, AusIndustry, Commercialization Australia and other service providers. GOLD will offer access to a range of capabilities including: skills and technical expertise through the existing ‘Researchers in Business Scheme; Design through a new Design Solutions initiative, Management Skills Improvement through extending leadership capabilities and marketing through associated government bodies.
Improving efficiency and streamlining costs to position Australia as a world leader in clinical research and the commercialisation of new medical technologies with $9.9m allocated to specific clinical trials.
3. ‘Helping SME’s to grow and create jobs’
The main initiatives are:
Creation of ‘Venture Australia’ to facilitate the growth of new knowledge based and innovation driven businesses in Australia, to increase industry competitiveness and to attract new investment to Australia based on our areas of strength. This will have an allocation of $350m. The government will match $ for $ investment taking only a return on the long term bond rate.
Government will be a customer to innovative firms through their purchasing power for requiring delivery public services. The ‘Enterprise Solutions Program’ will fund innovation to develop solutions for future government requirements through improved practices, products and services. The government will spend $27.7m over 5 years on this program.
Enhancing ‘Enterprise Connect’ services to a wider range of SME’s. Eligibility will be extended to professional services, information & communication technologies and transport & logistics sectors.
R&D tax incentives will be restructured into a new tiered structure with the third tier of very large companies with an annual Australian turnover of $20b under the non-refundable 40% R&D tax offset.
Immediately following the announcement, the AFR ran an article that gave the reactions of the major players. At a speech to the AWU Conference, Prime Minister Gillard defended the R&D cuts to large corporations as financially responsible and in line with “Labour Values” arguing that the big companies have the financial and market incentives to innovate without government support. The Australian Industry Group welcomed the changes but expressed reservations on the R&D cuts to large businesses. The Minerals Council of Australia expressed concern on the plans to embed public servants in companies as “unnecessary, unwarranted and inefficient”. The CEO also expressed concern on the reduction of incentives affecting overseas views of Australian tax arrangements. The Greens described the changes as toothless and demanded mandated use of Australian goods and services. The Australian Chamber of Commerce & Industry CEO appeared to be in general agreement but questioned value for money and whether it would offset damages done to industry by other policies. The supportive AWU described the package as a “game changer”.
Peter Roberts in a comment column in the AFR described the initiative as a ‘flawed innovation plan’. He questions the local content rules, quite rightly stating that at the end of the day no one is forced to buy Australian. He praised the $350m of venture capital to be made available as a market based model where previously the direct investment model through “Commercialization Australia” had bureaucrats picking winners and so moving to a market based approach is more desirable. Roberts also praises the new industry innovation precincts that are modelled on the successful German ‘Fraunhofer Institutes’. Again it is a move towards private incentives for the precincts as demonstrated by the first centre set up by Kraft Foods at Ringwood opened earlier this month driven by the private sector rather than government initiative. Roberts does criticize the removal of the R&D concessions as ‘punishing success’ and also asks the important question of whether there is a need for two more government bodies, an industry innovation Network and an Australian Participation Authority to administer all this?
This plan cannot be found wanting in all areas and some moves, particularly the Venture Capital Fund should be applauded but there is much in the structure that feeds the Labour model. Julia Gillard consistently argues that all their policies are based on ‘labour values’ and are focused on creating jobs. But yet again the jobs created here in the first instance are bureaucratic, with the two new authorities in an area that is already overburdened with numerous government bodies. The administrative challenge to avoid duplication must be real with so many similar authorities and support units. The labour ideology of centralized government is still under writing this plan where as the Liberal principle of the need for smaller government from a cost and an effectiveness perspective has more appeal. The idea of embedded AIP Opportunity officers is just another level of cost to an organisation. Companies are only going to buy local content if the value proposition is correct for them and this package does nothing to correct many of the structural costs incurred by business and the economy in Australia. Ensuring that both the company managing the project and the Australian companies capable of delivering goods are aware of each other’s plans and capabilities is essential but at the end of the day such decisions are quite rightly made on product performance, price and delivery and installing bureaucratic checks does nothing to ensure Australian firms compete against these key criteria.
The innovation Precinct Concept is not new with Silicon Valley of the 1970’s as an early successful example. In addition, the UK government have just announced a similar program called ‘Catapult’ and the US’s ‘National Network for Manufacturing’ while Victoria’s previous example at Port Melbourne did not succeed. The idea of focusing innovation into specific areas is certainly a good idea, although what is important is to make sure the industry area is progressive and well niched. The first Precinct at Clayton, the AMMP, is already up and running but its website would suggest that they are focused on research areas rather than a specific industry. It is again unfortunate that this initiative creates yet another top heavy bureaucracy with tiers of boards. In addition, the complexity of ways of obtaining funding through the myriad of options must be very confusing and limiting to start up organisations. The other question is whether with today’s technology, a cheaper and better solution would be to create ‘virtual precincts’. The Kraft food precinct in Ringwood is good but to extend the concept to a ‘food’ niche would surely involve companies geographical separated and raises the question of would not using ‘virtual precincts’ utilizing the potential of the NBN not be nearly as effective solution at a much more effective price? Of course, the infrastructure investment of $200m plus will be more attractive to construction unions support than a virtual solution.
The plan to remove the R&D grants from large companies is a short-sighted and bad idea. Highly successful British entrepreneur Sir James Dyson said in Sydney recently that “it is just crazy to steal or take money from big companies”. It seems that the government just wants to penalize large companies, not only with this but with the focus on the mining companies with the MRRT and the ubiquitous Carbon Tax. There seems to be a belief that big companies are just easy pickings. It may be that the government is playing ‘Robin Hood’ taking from the large to feed the Small SME’s but there is a danger that this myopia will affect global strategies and turn once large companies in Australia, into large international companies with small companies in Australia .
The consistent message of late that innovation is the key to a resurgent manufacturing sector seems to be partly addressed by these initiatives. The need for industry and academia based R&D to become more closely linked is laudable but it is difficult to see whether academic organisations have really understood that they need to be strongly commercially focused. One of the other key messages in this plan is that while creating a better environment for SME’s to flourish, the government believes that new entrepreneurial managers need a new level of training to maximize their potential; hence the proposal for “Centres for Workplace Leadership”. Submissions for the provision of this Centre closed at the end of January and is to be in operation by the end of March 2013. With such a short reaction time I really struggle to understand how and where the visionary thinking has occurred to identify and develop the transferable knowledge and skills the manager of tomorrow needs in his ‘toolbox’. I cannot help thinking this was a loaded solution just waiting for an engineered question? The other question is whether organisations like ‘Enterprise Connect’ are going to have the skills to expand to deliver to a wider audience. Does the organisation have the consultants with the depth of global experience to turn small SME’s into potentially large and successful companies remains to be seen. My personal experience is they help small inefficient companies become more efficient small companies.
What is not in the plan? Well for the unions to describe it as a ‘game changer’ would automatically to suggest to this sceptical author that they see no pressure for collaborative change in the plan. While the Gillard Taskforce proposed a new level of cooperation and collaboration between employers, workers and unions; the recent changes to Fair Work Law just increase the gap between management and unions by increasing the already wide influence of union officers. The Industrial Relations arena still seems to be so emotively dangerous for the Coalition for potentially losing votes that one can only hope they are just playing safe and will start to make sweeping changes after their expected and almost demanded victory. The other issue is the reduction in bureaucracy that is required and this plan seems to move in the wrong direction. Cutting government red tape, a more appealing tax regime and a realization by the unions and the populace that our industries operate in an increasingly challenging world environment and so all ‘enshrined rights’ should be up for review, is sorely missing in any Labour plan. But let’s see the Coalition plan please.