Can the Albanese government’s proposed new Future Made in Australia Act “draw together the threads” of industrial development activity across the country to create a competitive, knowledge-driven, net zero economy?
The Prime Minister’s recent announcement is a significant step towards a modern, integrated industrial policy, but success will depend on how deeply the government can institutionalise this new approach.
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Departing as he said from “old orthodoxies”, the Prime Minister said the new legislation is set to increase the opportunities for domestic manufacturing by bringing together a range of existing and new policies, and ensuring they are implemented in a more coordinated way.
Revitalise and reinvent
Looking around the world, the US Inflation Reduction Act, EU Chips Act, and the Made In Canada Plan are all making bold investments to secure their own slice of new advanced industries. Australia can’t outspend any of these governments, but we can be smart about setting our priorities, and we can learn from how industry policy is changing.
The biggest question is whether Australia has an adequate research and innovation system to support the risky and difficult process of diversifying Australia’s narrow trade and industrial structure. Do our researchers, investors, businesses and policymakers have the “legs” to carry the weight of our national priorities?
The US Inflation Reduction Act, EU Chips Act, and the Made In Canada Plan are all making bold investments to secure their own slice of new advanced industries.
As a nation we are grappling with a diminished industrial base and an R&D system that is smaller (as a proportion of the economy) than most OECD countries.
In the places where the Commonwealth is making strategic bets – such as through the National Reconstruction Fund, the Research Translation and Commercialisation Agenda, or CSIRO’s missions – priorities appear to be made without clear coordination.
More than 30 unique industrial goals
In our research we have identified over 30 unique industrial goals across Commonwealth policy, with research and innovation spending spread over 160 budget line items and 14 portfolios.
We reviewed nine international cases where governments implemented modern industrial policies with specific goals. While these policy approaches vary according to circumstances and capabilities, there are enough similarities to boil down their effectiveness to three factors: directionality, policy mix diversity, and governance. These lessons can be applied to Australia’s goals.
Firstly, the Australian industry landscape needs directionality: a small number of clear, well-defined goals backed with a high-level political and fiscal commitment that signals directions to industry and the economy.
In this instance, the more precise the better. A goal like “natural resources” can mean all things to all people – there’s no guarantee that thousands of businesses, bureaucrats and boffins will be aligned in their work. Whereas something like “export scale green aluminium” provides clarity and specificity.
Australia also needs to leverage a diverse suite of policy tools. New industries require more than just capital to survive, and so an integrated approach to industry policy needs to go beyond providing loans and equity finance.
The best approaches deploy a diverse range of policy instruments across the commercialisation journey: investing in research, unblocking supply constraints (for instance, by ensuring new industries have the workers or infrastructure they need), and building demand through measures like public procurement or growing international markets.
We reviewed nine international cases where governments implemented modern industrial policies with specific goals. There are enough similarities to boil down their effectiveness to three factors: directionality, policy mix diversity, and governance
Finally, our national innovation system needs some level of coordination to “draw together the threads” of activity.
This could be achieved through a ministerial committee, a Commonwealth-state group established under the national cabinet, or a preferably dedicated agency like Sweden’s Vinnova or Innovate UK.
Its role would be to provide a forum for high-level government coordination, engage with buy-in from leaders across industry and government, and ensure alignment in funding and policy delivery. Such an institution would go beyond the remit of existing bodies like the National Reconstruction Fund, CSIRO or Industry Innovation and Science Australia (although any one of these institutions could be given the mandate and resources to play this central role).
A future made in Australia is a worthy ambition for the country. Now the ambition needs to be followed by hard work to develop clear directional goals, deploy a diverse policy mix, and get alignment between a myriad of actors. Putting in this hard work today can help us secure the industries of tomorrow.
Toby Phillips and Esther Koh work at the Centre for Policy Development, an independent research institute. Emeritus Professor Roy Green is Special Innovation Advisor at the University of Technology Sydney and CPD Fellow.