The big transformation

I am not sure whether Labor backbenchers read my plea for the manufacturing sector last week, but a report in the Australian Financial Review today suggests there is growing angst about the issue.

A group of about 20 Labor backbenchers met with Industry Minister Kim Carr on Monday to discuss the parlous state of Australia’s manufacturing, retail and tourism sectors, which are being whacked by the strong Australian dollar and a sluggish global economy.

According to the report, Carr’s response was pretty clear – we’re in for a “difficult and painful” period.

“We now have economic circumstances where the exchange rate has had a 45% movement.”

“This is the biggest structural change we have seen in 50 years.”

“There is going to be a period of rapid adjustment.”

No arguments here, Minister. The question that the Labor backbenchers want answered is: What can you do in the short-term to ease the pain?

Carr says the key measure is “improving productivity through increased re-skilling” and points to the Government’s new R&D tax credit (due to pass the Senate any day now) as a key initiative.

“We are in the business of transforming companies. The last thing we can do is remain static. The status quo is not good enough for the biggest transformation in 50 years.”

I think Carr is right. Protectionism isn’t coming back. The labour laws are unlikely to change much. Re-skilling and encouraging innovation are the key areas where governments can really help support industry through this structural change.

But the question is – can the Government do more?

The centrepiece of the Government’s innovation program has been Carr’s move towards the R&D tax credit, which will be three years in the making when it finally comes into force next year.

Carr has a lot riding on the scheme, which he says will steer funding towards SMEs and away from big business. However, the manufacturing sector hates the new system and is concerned that the sort of regular product development that is a vital part of what they do will be cut back in some way.

Carr needs the tax credit scheme to be a big boost for both SMEs and manufacturers – something that could be difficult.

The R&D tax credit aside, Carr needs to find ways to do more.

His Commercialisation Australia program is up and running and looks to be doing good things – could this be extended further?

Are there new funding programs to assist exporters, particularly as the current Export Market Development Grant is under-funded in the eyes of many?

Are there some bold ideas left over from Terry Cutler’s review of Australia’s innovation scene in 2008 that we could revisit?

Carr’s dead right on the importance of innovation – but he may well need more cash to back up his words.