To tackle supply chain issues caused by COVID-19, in 2020 the Australian government developed a $1.3 billion fund1 known as the ‘Modern Manufacturing Initiative’ which focuses on 6 key industries of both economic and national interest for Australia, these are:

1. Resources Technology & Critical Minerals Processing
2. Food & Beverage
3. Medical Products
4. Recycling & Clean Energy
5. Defence
6. Space

The Modern Manufacturing Initiative was developed to help Australian manufacturers scale up, and become more competitive in the global market. The 2022-2023 federal budget continues to incentivise Australian manufacturing by providing an additional $1 billion investment package to support the Modern Manufacturing Initiative2.

Australia provides a unique environment for manufacturing businesses to thrive both currently and in the future. The four main reasons manufacturing can succeed in Australia are:

Highly Educated Workforce: Australia has one of the most advanced workforces, with 44% of the workforce holding a tertiary qualification. This shows that Australia is ready to take on advanced roles in manufacturing, such as R&D and utilising industry 4.0 technologies to improve efficiency and quality in manufacturing.

Base Resources:  Australia has a diverse array of resources supporting all six of the strategic priority sectors, from a strong agriculture sector to rare earth metals to oil and gas. We currently export these as base resources, rather then add value to these goods locally.

Market Proximity: With Asia showing extreme levels of growth, Australia’s historical disadvantage which is its location is now shifting to become an advantage as the buying power of Asia dramatically increases alongside the demand for high quality goods which Australia already produces due to its strong policy environment.

Public and Private sector support: The Australian government has directly promised $1.3 billion dollars towards grants linking innovation to industry and global markets1. This does not consider other initiatives the government has put forward such as the $150 billion+ naval shipbuilding college3 and the NSW government developing the new city of Bradfield, which predominantly focuses on the six key areas of the national manufacturing plan4, alongside developing a national manufacturing hub, linking R&D to industry.

Whilst there are many benefits of manufacturing in Australia, developing an appropriate business case and strategy to manage Australian Manufacturing is crucial due the large amount of CAPEX and risk associated with these decisions. To assess whether you should establish or expand your Australian Manufacturing practice, consider the following:

1. What is your organisation’s manufacturing vision, network strategy and its alignment to the overall business strategy? Alignment to the overall vision is critical to determine any given site’s role in the overall network design as well as its impact on the business’s resilience and how it impacts cost, quality, and service to customers.
2. Consider the primary cost drivers in your business and how they interact with the Australian market.  Australia has different cost drivers then other markets such as higher energy and labour prices, but it is important to consider if these are major levers within your business or can be mitigated by using technologies such as smart operations and renewables. These technologies provide businesses with improved production time and mitigate increased cost from issues such as machine downtime.
3. Does your product align with the governments strategic priorities sectors? These areas have substantial amounts of support, financial and policy as these sectors are likely candidates for future funding and to receive support in areas such as international trade deals.
4. Consider how your business can leverage local strategic advantages within the Australian market.  As discussed above, Australia provides a unique value proposition to manufacturers and understanding how to leverage advantages such as strong infrastructure and leading R&D capabilities will dictate where you build your facility and what products you produce for the Australian and global market. 

Complex market dynamics lead to difficulties that can complicate key business decisions such as where to develop your facilities; how international and local regulations apply and what products to manufacture in Australia.

Deloitte can support you in developing your business case, strategy and understanding the regulatory environment. Deloitte’s Manufacturing Strategy and Smart Operations practice helps global and Australian manufacturers translate their business strategy into practical operational plans through an effective manufacturing strategy.