Alongside coal, steelmaking has dominated the Illawarra economy for the better part of a century. The industrial landscape of Port Kembla continues to define the lives of the people that work and live in its shadow, the people that I represent in the federal electorate of Throsby.
When I left high school in the early eighties, the Steelers NRL team was still running around in the top flight (before merging with St George), and many of my mates took up apprenticeships with the company that sponsored the famous scarlet jersey, BHP Steel.
We were a steel city, a proud working-class town, just like our sister city of Newcastle. In many respects we still are. But just like Newcastle and in the other manufacturing regions around Australia at that time, the ground was already shifting under our feet.
Today, the current owners of the steelworks, BlueScope, has announced a restructure that includes cuts to production and 1,000 job losses at Port Kembla, as continues to struggle under some of the most difficult trading conditions in recent memory.
The Federal Government will be ready to help those steelworkers and their families, where we can. These are circumstances which have become sadly familiar to the Illawarra over the past thirty years. When I left school, the steelworks employed nearly 23,000 workers. As time of writing the current workforce is less than a quarter of that number, of which a mere 3,000 are directly employed, the rest being contractors.
The flow-on effect of any reduced production on the smaller firms that rely on BlueScope for business will need to be closely watched. When the steelworks sneezes, the rest of the Illawarra manufacturing sector catches cold.
The gloomy speculation has been constant over the last fortnight and everyone is bracing for impact. When it happens it will be like a blow upon a bruise: “expected, repeated, falling . . . with no smart or shock of surprise, only a dull sickening sensation and the doubt whether another like it could be borne.”
For Australian manufacturing, the softening up-period began in 2008 with the outbreak of the global financial crisis and they’ve been bashed up every since. In particular the high Aussie dollar and a minerals industry going gangbusters are combining with larger trends to deliver the mother of all hidings to our manufacturing sector.
It’s not so much the double-whammy, more like being on the receiving end of a punishing combination while up against the ropes. With the exchange rate at a 24 year high, it’s much, much more expensive to make and sell things here in Australia than it used to be. Internationally, our exporters are being priced out of the contest altogether.
While strong commodities prices are good news for our mining regions, for manufacturers they spell higher costs as the price of raw materials soar. Take steel for example. The prices of iron ore and coking coal have doubled, in some cases trebled over the past few years.
Acting like a huge magnet, the mining boom is attracting more and more infrastructure dollars and skilled workers. The new roads, rail and ports needed to bring minerals to market demand a greater slice of the infrastructure pie – dragging more jobs and economic activity to central Queensland and North Western Australia.
It’s the same with people, too. The prospect of incredible wages has lured many former manufacturing workers and their families to try their luck in the minerals game. There’s certainly no prospect of local manufacturers competing with the sort coin on offer from the big miners.
What makes this a problem is the lack of skilled workers to take their place. After more than a decade of underinvestment in workplace training and education by the former Howard Government, there’s no ready-made, trained workforce to replace them.
Manufacturing’s capacity to innovate and the level of investment in R&D require significant improvement. Game-changing economic infrastructure such as the National Broadband Network is still years away from completion.
Finally, there is the long-term shift in manufacturing production from the world’s developed economies to the developing world. Attracted by cheap labour, low production costs and made possible due to improved global communications; many western companies have shifted manufacturing operations to countries such as China, India, Vietnam and Brazil.
For many Australian manufacturers, it has become a desperate fight for survival, with the real possibility that if things don’t improve in the next 18 months, some will be forced to close their doors for good.
For this reason I’ve organised other Government MPs who share my concerns to form a Labor Manufacturing Group, with the aim of promoting sound policy and practical assistance to help our manufacturing sector during this difficult time.
We’ve called for Australian manufacturers to have greater access to business opportunities generated by mining investment and government sponsored infrastructure projects. The current scale of investment in the mining sector is off the chart. Giving more of our manufacturers a fair shot at some of these contracts could make the difference.
Likewise, when Government decides to build a new road or freight-line, manufacturers should be confident that there will be enough Australian content contained in the project to encourage local economic activity.
This is not a call to wind back the clock or return to tariff protection. Australia is an open, trading nation and it’s a big reason for the comfortable standard of living many of us enjoy. But the good days will not last without a manufacturing sector to drive technological change and maintain our trade balance.
It’s not a reaction to the carbon price, either. The cost impact of the carbon price is dwarfed by the rampant exchange rate and soaring input costs. Those manufacturers that are trade exposed and rely on emissions intensive production processes