The Future of Manufacturing in Australia

Thursday, April 24, 2014 - 09:04

Guest post by Alexander Gosling

If Australia is to prove to the world that it really is the ‘clever country’, then it must reverse the decline of the nation’s manufacturing industry.

What’s required is that local manufacturers need to move much faster to embrace the realities of the “third industrial revolution”. By that I mean, the manufacturing technologies that allow agile and flexible operations of which additive manufacturing is a prime example.

The manufacturing industry is too important as an engine of real value creation for our nation to let it wither on the vine. Why can’t Australia become another Germany when it comes to excellence in manufacturing? In that regard, we certainly need to improve the national return on the significant investment of taxpayers’ money currently allocated to research in public funded research organisations: our research organisations generate world class outcomes but we fail to harvest the value from these.

There is little evidence that large established manufacturing firms have much appetite to invest in growth or transformative new technology in Australia; very much the reverse – in almost every sector we see downsizing or shutdowns.  Only new companies are primarily focused on investing in new products, processes and manufacturing concepts.

I believe that maximising the emergence and successful development of technology based start ups is a powerful way to advance towards the revitalisation of Australian manufacturing. There is a significant volume of private sector money in the Australian economy that is looking for suitable investment opportunities. The major obstacle to the emergence of larger numbers of early stage high growth manufacturing companies is lack of appropriate funding for early stage companies.

There is a need to make it attractive for appropriate private sector investors to direct a proportion of their available funds to equity investment in early stage, potentially global and high growth, technology companies.  At present, there are seen to be too few success-models and in particular Australian venture capital firms that have operated in this sector have generally not performed that well, so the risks are seen as too high by most private sector investors.

A previous example of such an incentive was the Australian Government’s Syndicated R&D Scheme. For all its faults, this scheme was assessed as being highly successful in mobilising private sector funds to R&D and thereby inducing significant private sector R&D projects that would not otherwise have occurred. A number of today’s Australian iconic technology based companies were launched or at the very least given a substantial boost by that scheme.

The critical gap is for the first round of funding after a technology is transferred from the research environment into a start-up company. Australia needs to more effectively bridge this funding “valley of death”.  Measures could for example focus on special tax concessions for first-round investors in new companies, subject obviously to qualifications to prevent abuse.

Today’s high-growth technology based start-ups can and must become the established firms of the future, replacing those that decline or leave Australia and generating growth in a changing global technological and economic environment.

Australia needs to achieve its economic growth potential!

Alexander Gosling was the founding director of Invetech. He has been working in the field of process and product development and related R&D, for clients ranging from high tech start ups to “smoke-stack” industry global companies, for 40 years.

He currently works for Capstone Partners, a strategy consultancy specialising in technology commercialisation and the development of start up companies, and is a founder and director of Metallic Waste Solutions Pty Ltd – a start up.