Post-COVID Manufacturing Renewal Represents Potential $50 Billion Boost to Economy
New research from the Australia Institute’s Centre for Future Work reveals that Australia ranks last among all OECD countries for manufacturing self-sufficiency. While this indicator confirms the dramatic decline of domestic manufacturing in recent years, it also reveals the enormous potential benefits that would be generated by rebuilding manufacturing back to a size proportional to our national needs: including $180 billion in new sales, $50 billion in additional GDP, and over 400,000 new jobs.
- Australia ranks last in manufacturing self-sufficiency among all OECD countries. Australians use $565 billion worth of manufactures each year, however, we only produce $380 billion. Therefore, Australia produces only 68% (just over two-thirds) of what we use: less than any other OECD economy.
- The COVID-19 pandemic has highlighted the strategic importance of domestic manufacturing capacity. Disruptions in global supply chains and protectionist trade policies by foreign governments have increased risks we might not be able to access essential products (like health equipment and supplies) when we need it.
- Manufacturing is not just ‘another’ sector of the economy. For several concrete reasons, manufacturing carries strategic importance to broader national prosperity and security.
- Australians purchase and use more manufactured goods over time; and manufacturing output is growing around the world. Allowing domestic manufacturing to decline, while our use of manufactured products grows, undermines national economic performance.
- Manufacturing is the most innovation-intensive sector in the whole economy. No country can be an innovation leader without a strong manufacturing base.
- Manufactured goods account for over two-thirds of world merchandise trade. A country that cannot successfully export manufactures will be shut out of most trade.
- Manufacturing anchors hundreds of thousands of other jobs throughout the economy, thanks to its long and complex supply chain. Billions of dollars’ worth of supplies and inputs are purchased by manufacturing facilities, supporting many other sectors of the economy.
- Manufacturing offers high-quality jobs, full-time hours and above-average incomes. And thanks to strong productivity growth and the capacity to apply modern technology, manufacturing offers the prospect of rising incomes in the future.
“As Australian governments and business leaders realise the importance of manufacturing in rebuilding the national economy after COVID, this research shows that Australia now has the smallest manufacturing industry relative to domestic purchases of any OECD country,” said Dr. Jim Stanford, Director of the Australia Institute’s Centre for Future Work and author of the report.
“These findings confirm the enormous task ahead of the country in rebuilding our domestic manufacturing capacity. However, it also highlights the enormous economic benefits that would be generated by getting manufacturing back to a proportional size: including $180 billion in new sales, $50 billion in new GDP, and over 400,000 new direct jobs.
“While two-way international trade in manufactured products will always be essential, as a nation we should be manufacturing in aggregate as much as we are using. If we rebuilt a manufacturing sector that was broadly proportionate to our needs, our manufacturing industry would grow by almost 50% – generating enormous benefits in jobs, incomes, innovation and exports.”