Written by Ian Hudson, 26 May 2021
With Australian Made Week now underway, @AuManufacturing’s editorial series – Celebrating Australian Made – asks the hard question. Here Ian Hudson asks whether an Australian-made product is really more expensive?
There is a commonly held belief that it’s more expensive to buy Australian Made products compared to those manufactured overseas.
While there may be some truth to this statement, there is a question of what impact is this purchasing decision having on Australian industry.
This is particularly evident in the manufacturing space, with many overseas items being made from Australian raw materials and then sold back to Australian businesses and consumers.
The first Australian Made week is underway, and is encouraging Australians to consciously choose to purchase Australian Made products over those from overseas.
According to Roy Morgan Research, 93 per cent of Australians say they are more likely to buy products made in Australia, up from 87 per cent a year earlier.
With some manufacturers now looking to re-onshore their manufacturing, or their supply chain, capabilities, I have often wondered why it is that cheap labour rates can make a steel object, in one example, for 80 per cent cheaper than the Australian equivalent.
One example is iron ore, which has been shipped from Australia to overseas, smelted in and formed in a capital-intensive – not labour-intensive – process, to then shipped back to Australia, and passed through our expensive ports and yet it is still significantly cheaper than the Australian made product.
Cheaper labour could not possibly make that much difference!
Over the last few decades, consumers, business and government have taken a laissez-faire view to buying from Australia. “Let the market decide what Australia is good at”, was the underlying foundation of this approach.
It turns out that the underlying foundation was full of flaws. In the meantime, many companies have gone offshore and now manufacture overseas.
Australian manufacturing industry has not only lost whole vertical supply chains, but many supply chains have been hollowed out.
That is, the product might be made in Australia, but the components are all imported. We think we have an industry, but it is just a skeleton of its former self.
Like the Pied Piper of Hamelin, we have been led along with tunes that just aren’t true.
Yes, labour costs might be lower in other countries, but how much difference does that really make to the final cost?
It is not just the labour rate that increases the price of an item, but the add ons. Add ons such as worker safety overheads, environment protection overheads and quality of life overheads. Not to mention the quality-of-life Australians have because they do not live in one of these low wage rate countries.
Export subsidies, substitution with inferior materials and cutting corners in manufacturing also make the gap larger, of course. But keeping workers safe and the environment, waterways and food clean all come at a cost. And those costs are not typically considered in the purchasing decision.
So when a consumer or a business buys something from overseas, they should recognise that the Australian product comes with protection of the things that matter to us.
Buying Australian will help to maintain that protection and maintain the lifestyle we are all used to. It’s not unreasonable to pay a bit extra as a levy for the things that we all share the benefit of.
With our manufacturing industry neglected for decades, we have a great opportunity to change this. The upside is that, with large investment of course (but in a low interest environment), we can now design and create totally new production lines that use the latest equipment and Industry 4.0 philosophy, while our overseas-based competitors are struggling with older machinery, which they cannot replace without a hit to their P&L to write off the remaining book value.
Every manufacturing manager I have met would like to change to a larger location, replan the process flow or introduce the latest technology to improve quality, monitor production rates and even monitor use of the product when in use. Now is their time.
The Australian market is still small, so we might need to take a global view when considering potential markets.
In many industries, this is the only way we will be able to justify the size of investment now required to restart our manufacturing industry.
So don’t buy Australian just because you’re Australian too. Buy Australian as your investment in the protection of what you treasure and admire as an Australian.
Ian Hudson is the Executive Director of the Industry Capability Network New South Wales (ICN NSW), a government funded not-for-profit that introduces businesses of all sizes to projects large and small across NSW and has a network of experienced industry procurement and supply chain specialists.
Media Source: AuManufacturing – CELEBRATING AUSTRALIAN MADE – IS LOCAL PRODUCTION MORE EXPENSIVE BY IAN HUDSON