Australia / Press Releases
Federal Budget Reveals Manufacturing Winners

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by Matthew Reeves
Oct 01 2020

The Prime Minister has revealed the manufacturing industries that are set to receive priority status in next week’s federal budget. These industries will benefit from $1.5 billion in new investment to hasten their post-COVID-19 recovery. The selection of these industries has been based on Australia’s unique competitive advantages, the necessity of supply-chain security, and the government’s ability to create a more efficient business environment.

‘Australia has a competitive manufacturing advantage in several areas, including medical items, mining equipment and food products,’ said IBISWorld Senior Industry Analyst Matthew Reeves. ‘Leveraging Australia’s advanced manufacturing capabilities is a big growth opportunity.’

The $1.5 billion will be spent over four years, including $52.8 million in grants that will offer $1 in public investment for every $3 provided by private backers. Research into supply-chain resiliency will receive $107.2 million, being a major focus after the disruption caused by the COVID-19 pandemic. Close to $1.3 billion will be used to fund major manufacturing projects, attracting large investors from overseas.

‘Australia cannot compete in the manufacture of low-value labour-intensive items such as clothing and footwear. However, that does not mean we cannot manufacture in Australia at all,’ said Mr Reeves.

The industries prioritised by the Federal Government include:

Recycling and clean energy

The Waste Remediation and Materials Recovery Services industry, which includes recycling activities, is set to receive a boost from government support. The recycling industry was thrown into chaos in early 2020, following a series of announcements from Asian nations that they would no longer accept imports of contaminated recycling waste from Australia. Revenue for the industry is expected to grow at an annualised 1.1% over the five years through 2020-21, to total $4.6 billion.

Australia has exhibited remarkable growth in clean energy investment over the past decade, despite the ongoing disruptions of climate and energy policy shifts. Revenue for the Solar Electricity Generation and Wind and Other Electricity Generation industries is expected to grow at an annualised 42.3% and 6.6%, respectively, over the five years through 2020-21.

‘Major electricity retailers are expected to replace coal fired power stations with renewable projects, to increase reliability and reduce costs over the next five years,’ said Mr Reeves.

Resources and critical mineral processing

Australia has a competitive advantage in several mining industries, due to its access to scarce mineral reserves. However, much of the downstream manufacturing of mineral products is conducted overseas, limiting the value generated by Australian businesses. For example, Australia is a major producer of lithium, but 99.5% of the value of Australian lithium ore is added through offshore electro-chemical processing, battery cell production and product assembly. In 2019-20, Australia’s lithium exports reached $1.0 billion.

‘The Battery Material Mining industry is set to grow at an annualised 19.2% over the next five years, as increased global adoption of electric vehicles drives demand for battery materials. Australia’s move to expand downstream mineral processing is likely to deliver more value to the economy overall,’ said Mr Reeves.

Other industries set to benefit from government support include Non-Ferrous Metal Casting and Gold and Other Non-Ferrous Metal Processing.

Space and astronautics

The Satellite Communications and Astronautics industry is set to grow at an annualised 7.7% over the five years through 2025-26, to reach $8.7 billion. Profitability across the industry is projected to improve as the cost of manufacturing, launching and operating satellites declines. Australia is forecast to become an increasingly important part of the global space supply chain, particularly in providing ground station services.

‘By reducing launch costs, satellites have become increasingly affordable for downstream users of satellite data. As the cost of satellites declines, space activities are likely to be increasingly adopted across the economy,’ said Mr Reeves.

Medical products

The Pharmaceutical Product Manufacturing industry is expected to generate revenue worth $12.7 billion in 2020-21. Australia is home to several world-leading manufacturers, including CSL, ResMed and Cochlear, and has significant competitive advantages in the treatment of sleep apnoea and hearing aid technology. AstraZeneca, the largest pharmaceutical manufacturer in Australia, produces 80 different variations of anaesthesia and respiratory medicines at its state-of-the-art manufacturing facility in North Ryde, Sydney.

‘Pharmaceutical revenue is expected to rise by 3.8% in 2020-21, driven by ongoing growth in exports. Exports have expanded strongly over the past five years and are anticipated to generate over half of the industry's revenue in 2020-21,’ said Mr Reeves.

Food and beverage products

Australia is a major manufacturer of food products, producing far in excess of its own domestic consumption. Close to 71% of agricultural production is exported each year. The Agribusiness industry is expected to be worth $280.5 billion in 2020-21. Several major downstream manufacturing industries increase the value-add of Australian food products. These include the Meat Processing industry, worth $19.5 billion, and the Butter and Dairy Product Manufacturing industry, worth $7.4 billion.

‘Food product manufacturers have contended with volatile input prices, rising international trade and private-label brands increasing competition over the past five years. Rising consumer demand has benefited industry manufacturers overall,’ said Mr Reeves.

IBISWorld reports used to develop this release:

For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647
Email: mediarelations@ibisworld.com