Keynote Address to the Capability Papers
I would like to begin by acknowledging the Gadigal People of the Eora Nation, the traditional custodians of this land, and pay my respects to the Elders past and present.
I would also like to pay my respects to any Aboriginal and Torres Strait Islander people in the audience today.
Can I also acknowledge my state counterpart, the Hon Anoulack Chanthivong MP, NSW Minister for Industry and Trade, and Minister for Innovation, Science and Technology - a good friend of mine who will make a great contribution to NSW in this role.
Thank you to InnovationAus for the opportunity to speak at this event.
The topic of manufacturing’s role in the energy transition, and I might say, the central role of an efficient energy transition to net zero, reindustrialising the Australian economy …
… is an extremely important one – and it is central to the Albanese Government’s agenda.
It is good to see representatives here from the companies and institutions that are building capability – firms, associations, researchers, NSW Government, universities and unions.
You are the key players in the future of Australian industry and innovation.
Modern economies are racing towards a net zero future.
Your work is crucial in ensuring Australia remains competitive in this global challenge.
Government leadership is just as important.
The case for industrial revival is strong – economically, socially and strategically.
Smart, modern and bold industry policy is a prerequisite to addressing the big problems of our time.
We must move away from the small-minded and backward-looking view that pursuing ambitious industrial policy means inward-looking, protectionism.
In this new economic, strategic and climate reality, governments must provide clear direction and divert resources into mission-oriented industrial policy.
If we are to stimulate innovation, grow productivity and achieve a transformation of our economy, government needs to rewrite the relationship between industrial and trade policy.
As Assistant Minister for Trade and Assistant Minister for Manufacturing, I want to make it plain; one of the defining challenges of this era is to build industrial capability and sovereign capability and maintain Australia’s standing as a strong, confident open market economy that trades with the region and the world.
Australia is uniquely positioned in this regard – with limitless solar and wind reserves, globally significant supplies of critical minerals and advanced critical technology capability.
In this sense, we eclipse other countries.
In fact, our international partners only have enough domestic reserves to meet their own needs, whereas Australia has an abundance – an ability to meet domestic needs while growing export opportunities.
We must direct these resources and drive industrial policy not through a scattergun approach of grants that are contingent on the election cycle, but by building capacity in areas that matter for our national interest; value-adding in food and agriculture, enabling technological capabilities, value-adding in resources and mining.
Only with a sense of purpose powering Australia’s future will we lift Australian product exports up the global value chain and broaden our economic complexity.
This month’s update of the Harvard University Economic Complexity Index demotes Australia further down international rankings, from 91st to 93rd in the world for 2021 – between Uganda and Pakistan.
Australia’s product exports are dominated by raw commodities rather than value-added products.
The rationale for bold, modern industry policy to drive Australian exports up the global value chain has never been more urgent.
We live in the fastest growing region in the world in human history;
- With complex, challenging security and geopolitical competition that requires Australia to engage deeply in the region to shape a future where no country dominates, and no country is dominated;
- A region under enormous pressure from climate change impacting agriculture and food security, social and economic wellbeing, and posing an existential threat to some of our Pacific neighbours;
- A structural shift in the requirement for low-cost, reliable and low emissions energy in the region as a third of the world’s population makes the transition to net zero and higher standards of living and development;
- A parallel set of enormous opportunities for Australian national development, trade in complex goods and services, and the good jobs that flow from sustainable economic growth and security in the broadest sense.
Does anybody seriously believe that Australia can meet these epochal challenges without rebuilding industrial capability and economic weight?
Good industrial workplaces with high productivity, cooperative workplace relations and diverse and skilled workers.
Industrial jobs are good jobs – it doesn’t matter whether you live in the suburbs or the regions or small country towns like Glen Innes, where I grew up.
From Gladstone to Newcastle and Dandenong to the Hunter, regional communities grow and prosper around good industrial workplaces.
And it’s in our national interest to ensure this proud tradition continues as we transition to net zero.
But tomorrow’s industrial jobs don’t have to be defined by the stereotypes of the past - all blokes and high-vis vests.
Our workplaces are at their strongest when everyone is included.
Diversification – and crucially, industrial diversification – not having all our eggs in one basket - protects some of these communities that might be vulnerable to the winds of economic change.
That is especially the case in a carbon constrained global economy and during a time when the geopolitical contest is only sharpening.
The Albanese Government is determined to deliver structural economic change that builds resilience and capability and to reindustrialise our suburbs and the regions.
By that, I mean we meet the global challenge in terms of climate, that we make Australia a renewable energy superpower, and that we meet the competitive challenge for Australian manufacturing.
And the Government is acting.
The Albanese Government has committed $40 billion to achieve our ambition of making Australia a renewable energy superpower.
Public funding alone won’t be enough. The OECD calls for US$6.9 trillion in global investment each year to 2030 if we are to meet global climate objectives.
Indeed, the capital gap for clean energy investment in our own region is vast.
It requires public coordination and leadership, private investment, R&D and innovation – these are responsibilities and opportunities for Australia.
Australia has world-leading research, and our universities consistently rank among the top institutions globally.
Where Australia has historically stumbled is commercialising that research into real-world products.
The 2020 Global Innovation Index confirms this – Australia ranked 23rd out of 133 countries for overall innovation but for innovation outputs, Australia came in at 31st in the world.
Accessing traditional venture capital or private investment is harder in Australia. Too often we see promising young businesses look to other markets for investment because it’s more accessible.
That is in part because Australia’s total venture capital investment is relatively smaller than that of our international peers, particularly the United States.
Then there’s the added challenge – which many businesses I’ve spoken to have raised with me – of venture capital firms traditionally focussing on asset-light investments such as digital technology rather than manufacturing that requires capital-intensive investments upfront.
In Opposition, the Labor Party was alive to the challenge, knowing that we can’t afford not to act, knowing that we need a different type of solution that is also unique to our natural strengths.
Closing the capital gap here is key, as is sharing the risk with the private sector…
…and the National Reconstruction Fund is aimed squarely at this.
The NRF is one of the largest investments in manufacturing in Australian peacetime history…
… designed to diversify and grow our industrial base, create secure well-paid jobs and boost Australia’s sovereign capability.
The NRF will help Australian industry move up the value chain to seize the opportunities created by a net zero economy.
The NRF has seven priority areas.
There is value-add in agriculture, forestry and fisheries; transport; medical science; defence capability; and enabling capabilities.
But it’s the two remaining priority areas – renewables and low emission technologies, and value-add in resources – that are at the heart of what we’re discussing today.
We are investing up to $3 billion from the NRF in renewables and low emission technologies.
Investments may include the manufacture of clean energy components and other products used in connection with renewable energy generation, transmission, distribution or storage.
An extra $1 billion from the fund has been identified for value-add in resources.
This is an investment fund that will deliver capability in areas that matter to our national interest.
To complement the NRF, our $392 million Industry Growth Program will support innovative businesses to commercialise and expand local production in the Fund’s seven priority areas.
But since the Albanese Government came to office, there has been a quantum leap in the race towards securing renewable energy investments.
The advent of the Inflation Reduction Act in the United States – the largest investment in renewable energy and clean energy manufacturing in history – has already propelled other countries to action.
A US$369 billion stimulus package, providing concessional finance, loan guarantees and grants for clean energy manufacturing.
It also provides uncapped production subsidies for hydrogen, clean technology manufacturing, green metals and clean energy generation.
Subsidies like this stimulate output as well as adoption.
This is good news for the world, good news for the global energy transition.
But it’s a double-edged sword; the IRA is a magnet for global investment.
That’s why the European Union, Canada and other economies have reacted vigorously, with bold and modern industry policies of their own.
The Australian Government is intent on becoming a renewable energy superpower.
As I told the recent Manufacturing Summit, Australia can be “…more than merely a farm and a quarry and a nice place to visit”.
We must position ourselves as a clean manufacturing powerhouse.
There is, then, a twin challenge;
- Firstly, the commercialisation and capital challenge that the National Reconstruction Fund and Industry Growth Programs are designed to meet;
- Secondly, a fresh competitive challenge as the United States and other major economies engineer structural shifts in their economies in the race to net zero, incentivizing a faster pace to meet the climate and security challenges of the era and capturing the economic and social benefits.
The Albanese Government will meet the second challenge - the competitive challenge – head on, to ensure that Australia delivers on its renewable energy superpower potential.
Prime Minister Albanese, Climate Change and Energy Minister Bowen and Resources Minister King have been busy progressing with negotiating the Climate, Critical Minerals and Clean Energy Transformation Compact with the United States.
The compact will ensure Australian mining and resources firms can benefit from the US energy transformation and investments driven by the Inflation Reduction Act.
On top of the Compact, President Biden intends to ask US Congress to add Australia as a “domestic source” within Title III of the Defence Production Act.
The May Budget made some really important contributions in this area too, delivering $5.6 million to analyse intensifying global competition for the clean energy industry, and to identify actions to further catalyse clean energy industries, ensure manufacturing competitiveness and attract capital investment.
The Government will identify further actions by the end of this year.
Add to this the government’s $20 billion investment in our Rewiring the Nation plan, which will create new investment opportunities in cheaper renewables and long duration grid storage.
It will unlock cleaner, cheaper and more reliable energy.
And low-cost renewable energy will mean more jobs.
The Government has already signalled our intent, committing $2 billion for the Hydrogen Headstart program in the Budget.
The program will provide revenue for large-scale renewable hydrogen projects through competitive hydrogen production contracts.
The contracts will put Australia on course for up to a gigawatt of electrolyser capacity by 2030 – through two to three flagship projects.
The hydrogen industry offers enormous potential for our economy.
The numbers speak for themselves.
A large-scale local hydrogen industry could generate $50 billion in additional GDP by 2050 and create more than 16,000 jobs in regional Australia.
An additional 13,000 jobs could result from the construction of the renewable energy infrastructure required to power the production of green hydrogen.
These are the ‘good industrial jobs’ I referred to earlier that will be essential to the economic prosperity of the outer suburbs, regions and country towns.
So, these commitments will not only build on Australia’s established hydrogen strengths.
They’ll ensure the regions – that have always powered Australia – are well positioned for clean energy investment and jobs.
It builds on more than half a billion dollars of investment commitments by the government for the development of the Townsville Hydrogen Hub and regional hydrogen hubs in places like Gladstone, the Hunter, Bell Bay and the Pilbara.
Our regions have the resources, technical skills and trade partnerships to drive this new industry and the many jobs that come with it.
I saw this first-hand in May when I visited the Hysata facility at Port Kembla.
The electrolyser, invented here in Australia by CEO Paul Barrett and the team, shows what can be done onshore.
Their facility, which was officially opened by Climate and Energy Minister Chris Bowen only yesterday, is a landmark facility for Illawarra industrial investment.
It will employ hundreds of people.
It’s a boost for the Illawarra, and it gives the whole industry confidence to keep investing and to continue building the jobs for the future.
Australia can have a world-leading role in supplying our like-minded partners with the resources for accelerating the energy transition as well as meeting our domestic needs.
Australia is the world’s largest producer of lithium, a critical mineral needed for batteries used in electric vehicles.
And we rank among the top five producers of cobalt, nickel and magnesite.
But we only capture a mere sliver of the global value chain.
Australia accounted for 43 per cent of global lithium extraction last year but 99.5 per cent of the value of lithium is added offshore, through processing, cell production and battery assembly.
Building Australian processing and manufacturing capability, expanding local manufacturing of components used in renewable energy, will be key here.
If we are smart, and start making headway now, we can reach our emissions reduction goals while placing ourselves in the forefront of advanced manufacturing nations.
Growing and diversifying the manufacturing sector will help revitalise Australia’s industrial base, create secure, well-paid jobs, and drive economic growth.
Thank you and enjoy the rest of the program.