• Federal Budget 2020-2021

Modern Manufacturing Strategy

In welcome news, the Government has announced a new Modern Manufacturing Strategy as part of its JobMaker plan to stimulate the Australian economy through its recovery from the COVID-19 pandemic. The strategy will see $1.5 billion invested in Australian manufacturing over five years from 2020-21 targeting six National Manufacturing Priorities, identified as either areas of competitive strength or strategic national priority.

The National Manufacturing Priorities are:

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

The aim of the strategy is “to play to Australia’s strengths, improve collaboration and commercialisation, and create a sector that is modern, dynamic and highly skilled.” Industry itself will be engaged to collaboratively develop roadmaps for the priority sectors for two, five and ten year timeframes.

Funding will be delivered through three programs (Modern Manufacturing Initiative, Supply Chain Resilience Initiative and Manufacturing Modernisation Fund).

Modern Manufacturing Initiative

The Modern Manufacturing Initiative is the $1.3 billion flagship program underpinning the Modern Manufacturing Strategy. This program will deliver co-funding for large manufacturing projects with broad sectoral benefits across the six National Manufacturing Priorities. Specifically, the program will be delivered across three streams:

  • Manufacturing Collaboration Stream
    • This stream will support significant projects involving business-to-business and business-to-research collaboration.
  • Manufacturing Translation Stream
    • This stream will support manufacturers in translating good ideas into commercial outcomes, as well as supporting non-R&D innovation
  • Manufacturing Integration Stream.
    • This stream will assist manufacturers in integrating into local and international supply chains and markets.

All three streams are expected to open for Applications during the first half of 2021.

Supply Chain Resilience Initiative

The Supply Chain Resilience Initiative is a $107.2 million program to support businesses in establishing or scaling capabilities to address supply chain vulnerabilities. Eligible projects must:

  • Demonstrate how they address supply chain vulnerabilities for critical products or inputs identified in a Sovereign Manufacturing Capability Plan
  • Result in measurable strengthening of the supply chain.

This initiative will initially focus on health and medical products, including personal protective equipment. It will also be made available to sectors such as food, chemicals, and plastics.

Applications for funding will open after 1 July 2021.

Manufacturing Modernisation Fund

The Manufacturing Modernisation Fund was administered in 2019 to provide small and medium-sized manufacturers with funding to modernise their manufacturing processes, adopt new technologies, become more productive and create jobs. The fund was highly successful and has been renewed for a second round with an additional $52.8 million of funding. Round two will support approximately 150 firms that align with the National Manufacturing Priorities to make capital investments that will:

  • Increase employment
  • Upskill workers
  • Invest in new technology to support the COVID-19 recovery.

Round two of the Manufacturing Modernisation Fund will open before the end of 2020.

BDO Comment

BDO welcomes targeted support for the manufacturing industry. Manufacturing currently represents below 6% of Australia’s GDP, and its decline has contributed to a fall in Australia’s Economic Complexity (a widely accepted measure of national prosperity). Improving this figure will be a key step in Australia’s economic recovery, however, we would encourage expansion of the Manufacturing Priorities to accommodate a broader range of businesses.

Further, we note that grant programs are by their nature more opaque and provide no certainty in comparison to industry-agnostic entitlement programs. As such, we suggest that the implementation of any direct funding must be transparent and without bias.

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