Manufacturing could increase the complexity of Australian exports

Jens Goennemann, Managing Director of AMGC. Image credit: AMGC.

The Advanced Manufacturing Growth Center (AMGC) has made the case for Australia’s potential to increase the complexity of its exports by co-investing in local manufacturing excellence, in light of a new report.

Recent data from Harvard Business School revealed that Australia’s Economic Complexity Index (ECI) score slipped to 91st, down eight positions in ten years, putting Australia in the third lower in terms of manufacturing and exporting capacity.

The ECI emphasizes Australia’s reliance on exporting low-complexity items such as commodities and highlights the opportunity to improve item complexity. This could be done by adding value to natural resources or crafting more complex items in areas of strength.

The report states that “Australia is less complex than expected for its income level”. It goes on to say that “Australia has experienced a worrying pattern of export growth, with the greatest contribution to export growth coming from products of low and moderate complexity, in particular ores, slag and ash and products of ICT”.

AMGC chief executive Dr Jens Goennemann said the latest ECI report is a damning reflection of Australia’s reliance on commodity trading – or luck.

“If these ECI results were reflected in the world of elite sport, we would be mortified!” said Goennemann.

“Why do we accept such a poor result in our overall complexity scores when it is directly linked to our future prosperity? At some point, the “lucky country” will run out of luck; now is the time for us to act and start increasing the complexity of the things we manufacture and export.

The Harvard report states that “Australia has not yet embarked on the traditional process of structural transformation. An essential source of economic growth, this process reallocates economic activity from low-productivity sectors to high-productivity sectors. It largely shifts activities from agriculture to textiles, followed by electronics and/or machinery manufacturing.

Raising the country’s manufacturing profile requires long-term policy and co-investment from government as well as private sources. Multiple matched dollar-for-dollar micro-investments by industry participants are incentivizing Australia’s largely SME-based manufacturing companies to innovate and scale.

The investment provides the means to upgrade the skills of the existing workforce, hire new employees, advance much-needed technology and deliver commercially successful, high-value products to domestic and international markets.

To meet this national challenge, AMGC has successfully managed over $57 million in co-investments directly into Australian manufacturing and encouraged manufacturers to grow and export. AMGC’s targeted co-investments in 141 projects – all with a dedicated research partner to help solve specific challenges and increase product complexity – are expected to generate 4,000 new highly skilled and well-paid positions and, when completed , will bring in $1.6 billion to the economy.

To read Harvard’s ECI report, click here.

Sharon D. Cole