I was listening to ABC radio again yesterday evening and there was a very interesting (I use the words ‘very interesting’ a lot don’t I…apologies for that) item about the way Australian companies can remain profitable in an increasingly competitive global market.
The unquestionable truth is that we simply cannot compete with countries like India and China when it comes to cost of manufacturing/production…indeed, we lost that race many years ago.
However, western countries/companies still (just) lead the field in terms of innovation, and if your product or service is one (or more) steps ahead of the competition from overseas, buyers will typically allow for the extra costs associated with production.
The big ‘BUT’ here (there’s always a ‘BUT’ isn’t there!) is that India, and especially China, are investing large amounts of money into training their workforces and, of course, their students – it’s worth noting that many non-western countries are now boasting some VERY good universities, largely due to their country’s commitment to increasing the standards of their nation’s workforce.
This, of course, means that whilst we in the west can still claim to (generally) have a better educated and more innovative workforce, this won’t be the case for long!
The point here is that unless Australian organisations invest in the development of their staff, in particular in the area of innovation, we will soon find that we’ve lost our last remaining competitive advantage and are fighting for business with oversea’s rival organisations that are able to offer the same (or better) product or service but for much less!
Below is a related article I found in the Sydney Morning Herald.
Innovation key to prosperous future
By: Kim Carr — The Sydney Morning Herald – September 2, 2011
THE restructuring of BlueScope Steel has hit Australians hard.
Labor won’t turn away from the people of Illawarra and the Mornington Peninsula. Nor will we deflect attention from the pressures that have forced BlueScope to make these hard choices — a record high dollar, a volatile global market, intense competition and surging input costs. The same pressures are affecting manufacturers all over the country. Australia is facing its biggest structural change in two generations. People are entitled to know where this transition could lead and choose the path they want the nation to take.
No one is seriously proposing we intervene in the foreign exchange market, or remove the Reserve Bank’s independence on monetary policy. That leaves us with three choices.
We deal with distressed companies as best we can, using what fiscal flexibility we have. That offers little security against a volatile global market.
Or we choose to retool our industries, to reskill our people, to build a stronger economy on a new type of manufacturing. We move up the global value chain. Australians chose that path when they elected the Labor government in 2007. It provides the clarity and direction we need today.
This is not about fighting change, and nor should it be boxed into “protectionist” or “free-trade” agendas. Across the political spectrum, there is a growing global consensus that investment in innovation is the only way to build industries that compete in an advanced economy.
China’s expenditure on research and development is doubling every five years. India and the EU are committed to major new investments, with individual countries such as Sweden and Germany embarking on extremely aggressive programs. The US has made innovation the central plank of its recovery plan. They know the old ways of doing things are no longer good enough. Knowledge, skills and ingenuity are the new weapons of choice for manufacturing.
That is confirmed by Australia’s 2011 Innovation System Report, which demonstrates that innovation-active businesses are much more likely to lift their productivity, boost their profits and put people on the payroll.
So why do I say Australian manufacturers are up to this fight? We are a creative and resilient people and we should be prepared to back ourselves. The CSIRO, for example, is working with industry to develop a viable titanium-processing and manufacturing industry in Australia. Titanium alloys are light, strong, corrosion-resistant and biocompatible, but current production methods are too costly to expand their use beyond the high-end aerospace market. CSIRO’s new high-performance titanium alloy technology is far more versatile, bringing down the waste by as much as 90 per cent and the cost by about 40 to 50 per cent. That would allow Australia to open entirely new markets in the medical and energy sectors, and get more value from our substantial titanium ore reserves.
That is a snapshot of what innovation makes possible. What the future of Australian manufacturing could be, with the right capabilities. It won’t happen by chance, but it can happen by choice. That is the key to everything the government has been doing for the past three years. We are implementing the most ambitious innovation agenda in Australian history. The stakes are high, but so are the rewards. We want to be a place where ambitious people can excel.
That is why we are modernising the telecommunications system. We are investing heavily in training and skills. We are strengthening and upholding anti-dumping protections. We are using the taxation system to stimulate business investment. We are channelling investment into clean technology. We are investing record sums in the CSIRO and the broader research community. We are doing this to build a manufacturing sector and an economy fit for the 21st century. But it is not enough to open opportunities for companies: we need to equip people to claim them, and to deal with the inevitable difficulties that any company has to overcome if they are to transform the way they do business.
That is why we have just passed — over the objections of the opposition — the new R&D tax credit, a more generous and accessible innovation incentive than the existing tax concession.
We are also reinforcing our new business support networks, which deal with firms at every point of the business cycle. There is Enterprise Connect, offering advice and grant support for business expansion. There is Commercialisation Australia, getting Australian entrepreneurs onto the global stage. There are the Supplier Advocates and Industry Innovation Councils, building and marketing the strengths of local industry.
These are the foundations of a new Australia, a nation which can generate jobs and opportunities for all. It will not be easy — but it can be done.
Kim Carr is the Minister for Innovation, Industry, Science and Research.
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