Made in Australia

Growing up in Germany we had a film projector of the brand “Hanimex”. It is the short form for Hannes Import Export, which was a distributor of cameras, lenses, and other photographic equipment in Australia. Although the projectors were not made in Australia, there was an Australian brand in our household. The only other Australian product I can remember, which we later bought regularly, was red wine.

If you had asked anyone those days about Australia, you would have received an answer which possibly contained words like kangaroo, koala, Sydney, crocodile, snake, Ayers Rock, convict, barbecue, steak or Quantas. But the name of anything made in Australia?

Aussie, Aussie, Aussie

Australians then believed (and still believe) that Australian Made is an expression for quality. And that feeling was heavily promoted by the industry. In 1993 when I first time came to Australia, everywhere you could see all kind of logos often with an Australian flag, that outlined the Australian origin. This was really difficult for me to grasp.

It was (and fortunately still is) more or less unthinkable, that in Germany you would have found the German flag on so many products. Especially together with statements like “stolz deutsch” (proudly German), “im Besitz von Deutschen” (owned by Germans) or “In deutschem Besitz und stolz darauf” (German owned and proud of it). Certainly, in the “1000 years” between 1933 and 1945, Germany had had enough emphasizing of “Germanism” that it will last another 1000 years. Moreover, I also wonder, what people of other nationalities would say, if they found this kind of statements on German products today.

And since then, Australia has even extended it’s labelling of “Made in Australia”.

Country of origin label for food products sold in Australia

In 2016 the Australian government introduced a law, that requires food companies to specify the percentage of Australian ingredients, as well as whether the product was made, produced or grown in Australia. As a result, most food products in Australia now have to state whether they were grown, produced, made or packed in Australia or overseas. However, it mostly addresses the “Australianness” of products and not where the main imported ingredients come from.

Furthermore, food companies can claim their product is made in Australia if the food is processed in Australia. But that doesn’t necessarily mean any of the ingredients are actually from Australia. E.g. manufacturers adding salty water in Australia to fully imported pork can make it Australian made.

In a recent survey of more than 20,000 subscribers of CHOICE, almost all respondents said that knowing where the food and drink they buy comes from is important. When a logo on food shows “Made in Australia from 0% Australian Ingredients”, I also think it makes a difference where the ingredients come from.

“Made in Australia campaigns” and tariffs

Also non-food companies still regularly advertise their products as Made in Australia or that the company is owned by Australians. They hope that applying to Australians to support Australian producers will boost their sales.

Besides the labelling, manufacturing in Australia was helped along a good deal by very protectionist tariffs. That made Australian products cheaper towards imports and therefore more competitive. Consequently, behind those walls of tariffs, Australian manufacturing grew to its height in the 60s. For instance, the car industry had over 200 per cent tariff levels. Levels of protection were still high through the 1970s and ’80s.

I was very surprised, when I saw the exorbitant prices of imported cars the first time I came to Australia in 1993. For example, back in Germany a VW Golf was a standard car which was widely affordable. Here in Australia it was a luxury item.

But the tariffs were a double-edged sword. In other words, the effect was not only that imported products were more expensive but also that the prices for Australian products rose above a “normal” competition level and drove inflation to a high to a large extent. In 1974, it passed 15.4 %. Accordingly, Australians had to pay top dollar for sub-standard local products. Normally over time the degree of protection should have been gradually wound back as companies learn to compete, improve their productivity, and are able to face the international competition. But that didn’t happen.

Meanwhile, the producers felt like living on an Island of the blessed and became adept at lobbying for ever higher tariffs.

Cutting tariffs had a destructive effect

At the end of the 80s and the beginning of the nineties Australia reversed its policies and pulled down tariff barriers a to a large extent. For the manufacturing sector, it was devastating. The industry was exposed to competitive pressures, some went bankrupt and some went offshore. The manufacturing sector in Australia went from about 30 per cent to about 6 per cent of the GDP. In the late 1980s manufacturing was the biggest employer in Australia, with 16.5 per cent of the workforce. Now less than 1 million people work in the sector, accounting for 6.4 per cent of jobs.

Australia’s extensive mineral resources plus other primary products, such as agriculture, now account for about three quarters of its goods exports. In other words Australia is just digging it out of the ground and then sending it to other countries. There it gets manufactured into value-added products that Australia then reimports.

The end of car production in Australia

In October 2017, Australia witnessed the shut-down of its last car manufacturing plant. After 100 years of building cars in Australia, General Motors’ Aussie outpost, Holden, closed its doors. Before Holden, Ford, Toyota and Mitsubishi had already stopped producing cars in Australia. Not only the fierce international competition had to be blamed, but also that the manufacturers didn’t see the change in buyer profile coming.

For a long time, the Australian consumer preferred V6 and V8 sedan cars, such as the Holden Commodore with a Corvette V8 and the V8/V6 Turbo Ford Falcon. Then the SUV and the small engine economic vehicle gained popularity – leaving the local manufacturer and its roaring engines off the buyer’s shopping list.

In February 2020 Holden had more sad news for anyone who’s a fan of big V8 engines, massive burnouts, and the occasional ute: Holden will close up shop by 2021. Sales, design, and engineering for the brand will all cease completely, marking the final blow to that country’s automotive industry. One reason stated by GM was, that they could not overcome the challenges of the investments needed for the highly fragmented right-hand-drive market.

Depending on imports

The economic shutdown that followed the coronavirus pandemic has highlighted the vulnerability of Australia’s supply lines. The dependence on manufactured goods from overseas and especially Australia’s over-reliance on supply chains out of China became evident.

In June or July at big retailers like K-Mart, Target or even JB-Hifi, you could get the feeling, that they were closing down. The shelves were stripped bare of almost any goods you could imagine. Even display-models were gone. And now in October the situation is not much better. A lot of products are simply not available or it takes weeks to get them in. That reminds me of times when I was a teenager, when a lot of hardware was only available on order and you had to wait for weeks.

Make-believe Australian products

Consequently, it becomes also apparent that there are inauthentic supposedly ‘Australian Made’ products.

R.M. Williams for example can be considered an Australian icon. It has a fairly long history of making high-quality footwear, especially Chelsea boots (lose-fitting, ankle-high boots with an elastic side panel) but also riding boots and other. I have two pairs of R.M. Williams boots myself and I love them.

On R.M. Williams’ Website you get the impression, that their products are made in Australia, but that is not always the case. The majority of R. M. Williams products other than boots and leather goods are made outside of Australia, mostly in China and South East Asia. And R.M. Williams is not even owned by Australians any longer. In 2014, luxury fashion house Louis Vuitton Moët Hennessy (LVMH) acquired R.M. Williams.

Also other well known Australian shoe manufacturers, like Blundstone and Baxter Boots still make some boots in Hobart and Goulburn. However, most are now made in China, Vietnam and India. Blundstone has also opened a factory in Mexico for the North American market.

What could be in the future?

In these Covid-19-times, a lot of people talking of recreating the manufacturing base Australia once had. But this would require again a large dose of protection. And that doesn’t come cheap. It would damage Australia’s competitiveness and jobs primarily because the tariffs would act as a tax on the people. One just have to look at the USA today or at the times of Australia’s protectionist era.

Australia is the world’s biggest gas and coals exporter. Therefore, the current national government considers coal and gas as the primary mean for the recovery of the COVID-19 struck economy and also for the supply of cheap and reliable energy. In my opinion that might not be a sustainable outlook. The decline of China’s coal consumption and its crackdown on pollution suggests a bleak outlook for coal and gas exporters like Australia. But Australian industries could benefit with a pivot to clean and green technology.

Australia – a renewable energy superpower

Australia has a long coastline, intensive sunshine, stable society and reliable governments. Therefore, it would be an ideal country to become a world leader in large-scale and low-cost renewable energy infrastructure and energy storage. Australia could become a renewable energy superpower. But growing that industry will require government support and well-designed, bipartisan policies that stand up over the long term. Short-term policy support won’t be enough to create such a thriving industry. But there is still a lot of people who are saying, ‘No, we must keep our coal-fired electricity’. I am of the opinion that Australia has to get over these cultural wars about climate change and seize a once-in-a-century opportunity.

Another option would be to promote innovation with research and development incentives. It’s been done before. And innovative products require highly skilled workers to produce. Above all, these are the types of products other countries with lower wages simply can’t produce to the same standard.