Why food and beverage offers hope for an economic recovery that’s Made In Australia

This year’s federal budget put Australia’s food and beverage manufacturers on the front line in the national effort to start repairing the economic damage wrought by the COVID-19 pandemic.

The food and beverage sector is one of the six National Manufacturing Priorities named in the October 6 budget as part of the federal government’s Modern Manufacturing Strategy – a plan to kick-start investment and economic growth by focusing on industries that are natural strengths for the country.

In his October 1 National Press Club address ahead of the budget, Prime Minister Scott Morrison said one of the key factors in making manufacturing more competitive was that a medium-sized economy such as Australia’s should not “try to do everything” and instead build scale in areas of competitive strength.

Hence food and beverage manufacturing was named alongside resources technology and critical minerals processing, medical products, clean energy and recycling, defence and space as the industries that hold the most promise of future prosperity for the nation.

The prime minister observed that food and beverage manufacturing is “one of the fastest growing parts of our manufacturing sector in recent years and the largest employer in our manufacturing sector”.

Indeed, the food and beverage manufacturing sector directly employs 247,000 people in Australia, with many of those jobs in regional and rural areas.

With the plan unveiled, work is now underway on putting it into action, with the first step being the assembling of industry-led teams to work with government on designing the road maps for each of the priority sectors.

The road maps are to be delivered in the first half of 2021 and the Australian Food and Grocery Council (AFGC) is working with government on this process.

The road maps will set goals for the next two, five and 10 years, as well as identify the roadblocks to growth and priorities for action and investment.

AFGC CEO, Tanya Barden, said the strategy will deliver confidence and encourage urgently needed investment by food and beverage manufacturers in Australia.

“We are keen to create a roadmap for the future of the sector, working with the government to ensure that investment hits where it is needed, and roadblocks are removed,” Barden said.

“The government’s manufacturing strategy makes the most of the food and beverage sector’s natural competitiveness, which arises from being able to source quality agricultural inputs and process them to global best safety and quality standards.

Barden said the naming of food and beverage as a national manufacturing priority area is a recognition of the untapped potential in the sector.

“What this investment by the government demonstrates is that they know that our sector is one of huge potential to scale up, particularly in export markets, which account for one third of the sector’s revenues,” she said.

While the Modern Manufacturing Strategy opens up the potential for expansion, it also offers an opportunity to ensure the continued resilience and agility of businesses working in crucially important areas.

Barden said that the government had recognised the role played by food and beverage manufacturers in keeping supermarket shelves stocked and supply chains moving during the pandemic.

“I am very pleased to hear the government specifically call out that the strategy was designed to back Australian manufacturers to become more competitive, resilient and able to scale,” she said.

“To achieve this requires the right policy settings to drive a step-change in capital investment, which has been stagnant for a number of years because of a tough domestic trading environment and rising input and regulatory costs.”
Barden said capital investment in the Australian food sector went backwards in the most
recent period for which data is available – declining eight percent in 2018/19 and remaining below pre-GFC levels.

The Modern Manufacturing Strategy is worth almost $1.5 billion and comprises three main elements:

• a $1.3 bn Modern Manufacturing Initiative;
• a $107.2m Supply Chain Resilience Initiative; and
• and a $52.8m Manufacturing Modernisation Fund round two.

The Modern Manufacturing Initiative is the centrepiece of the strategy, with its main focus being to build scale in Australian manufacturing. The Government will work in partnership with businesses, and provide grants on a co-investment basis, to stimulate private sources of capital.

As outlined by the Department of Industry, Science, Energy and Resources, the Modern Manufacturing Initiative is split into three streams:

• A Manufacturing Collaboration Stream will provide funding for large projects that support business-to-business and business-to-research collaboration, to build economies of scale.
• A Manufacturing Translation Stream will help manufacturers turn ideas into commercial outcomes and invest in non-
R&D innovation.
• A Manufacturing Integration Stream will help manufacturers integrate into local and international supply chains and markets.

The investment will only be targeted at projects within the six National Manufacturing Priorities.

The $107.2m Supply Chain Resilience Initiative is about building a comprehensive understanding of Australia’s critical goods and services, supply chain vulnerabilities and what the potential options are for seeking to address them.

The government will work with industry to identify critical products, and map capabilities and vulnerabilities for normal times and periods of surge. This will build on the close partnership on supply chains developed throughout the COVID-19 pandemic.

Early on, the focus of the initiative will be on medicines and medical equipment, followed by products such as food, chemicals and plastics.

Funding will be available for businesses to establish or scale a capability that addresses a supply chain vulnerability identified in a Sovereign Manufacturing Capability Plan and must result in a measurable strengthening of the supply chain.

Businesses that align with the National Manufacturing Priorities – such as food and beverage manufacturers – will also be able to apply for grants under a second round of the Manufacturing Modernisation Fund. The second round has $52.8m in funding. It will be aimed at fast-tracking capital investment in technology upgrades to help transform businesses, and enable up to 150 additional local businesses to invest in shovel-ready projects.

Businesses can apply for grants of between $100,000 and $1 m. There is a co-funding requirement for businesses, with industry expected to match Government funding on a three-to-one funding basis.