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Wednesday, 8 December 2004
Page: 55

Senator LUNDY (1:44 PM) —I would like to speak today on the issue of skill shortages in the manufacturing sector. Under the Howard government we have seen a decline in manufacturing. The Minister for Industry, Tourism and Resources rarely mentions manufacturing, completely ignoring its critical role in a balanced, modern economy and society. Under the Howard government, we have watched manufacturing jobs disappear. Between the years 2002 and 2004, 50,000 jobs were lost. We have witnessed manufacturing's contribution to GDP decline and exports of elaborately transformed manufactures slow dramatically. The Howard government has failed to do anything to address the massive skill shortages evident in manufacturing. In this sector alone the Australian Industry Group reports that there are currently between 18,000 and 21,000 vacancies for tradespeople.

Skill shortages are a key impediment to jobs growth and productivity growth. The Howard government has neglected to address these chronic problems, undermining Australia's manufacturing capability. Just yesterday Sensis and Australian Business Ltd released quarterly survey results contained in their Manufacturing and allied services index. They are very telling of the dire need for the manufacturing sector to receive some attention from the Howard government. The survey found that Australian manufacturers have the lowest level of business confidence of any major industry, citing finding quality staff as the major issue dominating the sector, with a growing number of firms sceptical about the state of the economy now and over the next 12 months.

I would like to run through the key findings of the Manufacturing and allied services index. Fourteen per cent of manufacturing firms stated that the national economy would be worse off in one year. Twenty-one per cent of manufacturing businesses experienced problems in finding quality staff. This was cited as the most important business concern for the second successive quarter. This equates to over one in five manufacturing firms currently reporting difficulties finding quality staff—a problem far more acute than in other sectors. There was a dramatic decline in sales performance and lowered expectations for the current quarter. Also confirmed in the index was a concern with lack of work, preventing manufacturing and allied firms from increasing the size of their work force. Subdued growth in capital expenditure was cited, with the outlook for future investment falling. Manufacturing firms compared with other business sectors were the least likely to have experienced an increase in capital productivity. There was a decline in the proportion of manufacturers reporting increases in the value of their exports. Finally, profitability for manufacturers is falling dramatically—a net negative eight per cent of firms reported declines in the last quarter.

These findings confirm what many organisations have been saying for quite some time now—the AMWU in particular has been highlighting the skills shortage for some time. The chief executive of ABL said of the findings that skill shortages were the real issue confronting the sector, with a high proportion of manufacturing firms reporting that they were having difficulties finding staff. He said:

This is a two-pronged issue for manufacturers. Despite the fact that they are currently increasing employment, manufacturers are having difficulty finding sufficient staff with the skills they need to continue and are also having to cope with poor perceptions about manufacturing as an occupation. It will be important to address these issues to ensure continued strong growth in this important sector.

The CEO also said:

... while this quarter's results show that manufacturing firms are successfully creating more jobs, they are being held back trying to attract staff with the appropriate skills in a declining pool of potential employees.

But instead of addressing these sorts of concerns and the real needs of the sector, the Howard government is ignoring this incredibly important economic opportunity by refusing to comprehensively address the skill shortages. The evidence is right there for all of us to see. In the government's own figures, which were released late last month, a dramatic increase in the number of vacancies for skilled tradespersons was evident—a staggering 54 per cent rise over the last three years. The figures contained in the Department of Employment and Workplace Relations skilled vacancies index showed that vacancies for skilled tradespersons jumped from 97.1 in November 2001 to 149.4 in November 2004. These figures reveal the sharply rising demand for skilled workers in key areas, including the metal trades, automotive, electrical and construction industries.

It is worth reflecting on the half-hearted response the Howard government has had to the skills issue. We saw in the election a very late addition to their big-spending policies in the form of a handful of technical colleges that will not be fully in place for another four years and hence will do nothing to help Australian businesses, like those in the manufacturing sector, who are crying out for skilled workers right now. The need is now, not in four years time.

It is also important to put the skill shortages that are being experienced in manufacturing in the context of what is happening right around the nation. In Australia skills growth as a driver of productivity has dropped 75 per cent in the last 10 years. Australia will have a shortage of over 130,000 skilled workers over the next five years. Around 40,000 Australians are turned away from TAFE every year because the Howard government will not fund enough places. Most of the growth in the New Apprenticeships scheme has occurred in industries where there are no skill shortages. The numbers of traditional apprenticeships have remained largely unchanged since 1996. Between 20 and 30 per cent of new apprentices receive inadequate training, and half the people who do not finish their New Apprenticeships say it is because they feel they are being used as cheap labour instead of being trained.

Despite these systemic problems evident in the training for trades, the Howard government's plan for technical colleges will provide training to fewer than two per cent of Australian year 11 and 12 students. The vast majority of senior secondary students will still miss out. Early school leavers and year 12 graduates will also be excluded from the colleges. The flawed technical colleges plan has even been criticised by the Howard government's own members, with the federal member for Page, Ian Causley, saying last month that the new technical college in his electorate should be ditched because it is a duplication and that the desperately needed funding should instead be invested in the local Wollongbar TAFE. So the Howard government is wasting time and taxpayers' money.

Instead of wasting millions trying to duplicate the TAFE system, the government should act to address the urgent skill shortages now, fund our TAFEs properly and get more young people into apprenticeships in the areas of skill shortages. It is worth noting that the abolition of ANTA signals, I think, the end of a tripartite collaborative approach to vocational education in Australia. This will only serve to exacerbate markedly the sorts of chronic problems that are currently being experienced. How on earth the sorts of skills needs of industry of the future are going to be anticipated without that effective collaborative approach is beyond certainly my imagination. It represents a retrograde step and will make the problems that much harder to solve in the future.

It is also worth mentioning a Senate committee report, Bridging the skills divide, that was tabled late last year. That Senate committee warned that Australia will not have enough skilled metal, engineering and manufacturing workers to carry out the $20 billion worth of major infrastructure and resource projects expected in the next 10 years. It is not as though there is not enough intelligence and investigation into the skills shortage. As I mentioned, that particular report was published over a year ago, well in advance of any opportunity that the Howard government had in anticipating its policies in the lead-up to this year's election.

Australia's manufacturing sector is at a crossroad. Manufacturing is illustrative, I think, of the chronic nature of the skills shortage as well as the need for improved innovation and productivity to enhance our competitiveness. In the context of the loss of some 50,000 jobs, new sectors of manufacturing are not emerging with any strength to replace the sectors disappearing or going offshore. The years between 1996 and 2001 represent a period of missed economic opportunity that seriously hindered Australian manufacturing's ability to compete globally. We will now pay the price for the negligence during that period, when there was no investment in skills and the future of this important sector.

What this means is that, under the Howard government, we are attracting less than a third of the global investment we were attracting under the Labor government. Under the coalition, the Australian investment in manufacturing is one-tenth of the average achieved under the previous Labor government. The latest quarterly Australian national accounts: national income, expenditure and product released last week by the Australian Bureau of Statistics showed the continuing overall decline in manufacturing, with the industry gross value added, chain volume measures showing an overall negative two per cent change on the previous quarter in the manufacturing sector.

The Howard government have no vision or plan for the sector and no real clue about how to address the pressing need for skilled workers. They have effectively dismantled the one body that has the chance to do that planning, to advise the sector and to engage all parties and stakeholders in the process. The alternative that Labor put forward at the last election is the opposite: an agenda to boost enterprise, exports, jobs and growth. Labor believe that manufacturing plays a critical role in the modern economy. Whilst we will not have the opportunity to implement policies that we put forward at the last election, it is worth reminding the Howard government that Labor's vision, which included a centre of excellence for advanced manufacturing, an Australian manufacturing council and the 10-year manufacturing strategy to revitalise the sector, stands in stark contrast.

I would like to conclude my comments by characterising the magnitude of the challenge that stands before Australia in the manufacturing sector. We do need to become ever more competitive as the challenges of the global economy continue unrelentingly. I noted with interest in a BusinessWeek article that the US Bureau of Labor Statistics has been doing its best to continue its work in comparing the hourly compensation for factory workers across the world. I suppose it is not surprising that statistics for China have been incredibly hard to come by, so the challenge for the Bureau of Labor Statistics in the US was to look at averages and at the various rates of the hourly compensation for factory workers and to try to estimate what that hourly rate would be for China. It has come up with a figure and I think it is indicative and worth going through. In the USA itself, the hourly rate for manufacturing workers is $US21.11. This can be seen in context: the average around the world, for the 30 countries surveyed by the Bureau of Labor Statistics, is $US14.22. The next significant figure is the price of labour in Mexico—hourly compensation is $2.48, which is the lowest in the 30 countries surveyed, I believe, in that particular statistical analysis.

The best estimate by a researcher engaged by the Bureau of Labor Statistics is a figure of US64c for the hourly rate of factory workers in China. That represents an average of just over a dollar for workers in cities in China and around US45c per hour for factory workers in provincial areas. The article does not claim that the statistic is spot on, but it is certainly the best analysis that the US seems to have come up with. These are the sorts of competitive rates that we are going to be faced with. These numbers have a huge significance for Australia because they characterise the challenge of what we have before us and of our ability to compete on the world stage in manufacturing products. They also characterise the appalling nature of the neglect by the Howard government of the manufacturing sector over the last eight years. This is neglect that we will be paying a price for for the next decade and perhaps beyond.