Made in Australia can make a comeback, say our biggest entrepreneurs


But why stop at medical equipment? Countries everywhere are rethinking their reliance on China as the world’s factory, and some of Australia’s biggest entrepreneurs, with capital that can be lavished on big ideas, are already turning their minds to capturing a slice of a potential renaissance of Made in Australia.


In the decade to December 2019, manufacturing’s share of GDP fell 6.4 per cent to $104.5 billion, while the number employed by the sector fell 6.2 per cent to 921,200. Yet despite a battering by the global financial crisis, soaring currency and the rise of China, total manufacturing profits have improved by 12.9 per cent to $31 billion, thanks to a gradual shift to higher-end products.

US President Donald Trump, Anthony Pratt and Prime Minister Scott Morrison at the official opening of Pratt Industries’ recycling and paper plant in Wapakoneta, Ohio, in September 2019.  Alex Ellinghausen

Australia’s richest man, Anthony Pratt, rode out the bust by expanding his family’s Melbourne-based paper milling and recycling business in the United States. Pratt Industries earned $731 million in 2019, helped by tax cuts and instant investment write-offs introduced by his friend, President Donald Trump. This was just $31 million less than the earnings of Visy, his much older Australian business.

Holed up in Raheen, the family’s Melbourne mansion, Pratt, 60, is working harder than ever to drive profits as demand soars. He estimates Visy’s paper products already housed 70 per cent of the food and groceries sold in Australia before the COVID-19 pandemic. Now those groceries are more likely to be delivered to our doors in cardboard boxes, made in any one of dozens of Visy factories, from Spreyton in Tasmania to Ayr in North Queensland.

Anthony Pratt working from home in Melbourne. 

“People are going to buy more online for two reasons,” says Pratt. “One of them is because they learnt to do it during the COVID crisis, so they are used to it and comfortable with it. Number two is because they don’t want to be coughed on in the supermarket.”

He thinks the health scare will also play into the hands of the country’s farmers and food producers. “[Asia’s middle class] are going to prefer Australia’s safe, clean brand after this pandemic more than ever. I think we need to build on that, and not succumb to knee-jerk reactions or retreat back to the old world of regressive tariffs and fortress Australia.”

And therein lies the tripwire upon which a dirigiste resurgence of manufacturing threatens to stumble: as Pratt says, we can’t undermine the asset that’s as important to Australia’s prosperity as its natural resources – free trade.

“In the past, people said Australia’s population was too small to support manufacturing. But the free trade agreements have given us a huge market just to the north of us,” he says.

Pratt is not the only Financial Review Rich Lister who wants Australia to make good on its capacity to make more goods.

From another overworked phone in Melbourne, Paul Little – who built Toll Group into a transport and logistics giant, and became a billionaire when it sold to Japan Post in 2015 – has been crowdsourcing a plan to get containers moving in and around the country more efficiently.

“I was talking to a couple of my old customers the other day, and they’ve still got up to 30 pieces of paperwork to fill in for 30 different government departments every time they want to import or export something,” says Little, who’s also been appointed to the COVID commission and is working on a submission related to logistics.

The Home Affairs Department has been working for years on building a trade “window” which consolidates all this reporting to a single touchpoint and perhaps even automates it using blockchain.

The completion of that work is just one of the ideas that Little is collecting to free Australia’s exporters from their shackles. The 72-year-old might be better known as a property developer these days but logistics is clearly in his blood, as he rattles off a series of potential improvements to the country’s supply chains.

Melbourne’s railyards are in the wrong place, for a start. The Dynon yards near Port of Melbourne should be replaced by a less constrained site in the western suburbs. “Victoria’s especially bad, but we’ve got a problem nationally where only 10 per cent of goods leave our ports by rail,” he says. “The traffic congestion that creates is a pretty obvious logjam for us as a nation.”

Little even has a potshot at his old shop, Toll, describing the freight planes that both it and Qantas operate as “old and under capacity” and ripe for replacement, given they are now working “flat out” after the grounding of passenger aircraft which usually carry goods in their bellies.

The decline of Australian manufacturing creates a vicious circle of inefficiency in itself, Little laments. “For every 10 full containers that come into Australia, another five go out empty, and we’re all paying more for the movement of that thin air,” he says.

Power is thinking big on how to start filling those other five containers. One early idea is fertiliser, which Australia imports despite having the wherewithal to make it locally. “We should be self-sufficient,” he says; indeed it could even become an export.

He’s also deployed Andrew Liveris, the former Dow Chemical chief executive, to craft a long-term manufacturing strategy. Liveris, who was born in Darwin and has spent decades working in Asia and America, has advised the Obama and Trump administrations on how to boost manufacturing. He’s now back home in Sydney and has brought with him a blunt message. “Australia drank the free-trade juice and decided that offshoring was OK,” he told the Financial Review in April. “Well, that era is gone.”


Start talking about local manufacturing and someone is bound to bring up the demise of Australia’s car industry. Vivek Sehgal, whose estimated $5.5 billion fortune put him at 12th spot on 2019’s Financial Review Rich List, credits Australia’s manufacturing know-how with helping him build his $18 billion Motherson Group car parts empire. Two and a half years after Holden became the last local manufacturer to close, he’s incredulous that the government allowed the local car industry to die.

Born in Delhi, Sehgal became an Australian citizen in 1997, 20 years after starting Motherson with a 1000 rupee loan from his mum. He’d emigrated here in hopes that his business, then focused on making electric wiring for cars, could learn how to make the rest of a vehicle from an industry of comparable scale to India’s.

“What the Aussies would do to increase volumes without increasing capex was so interesting,” says the 63-year-old. He rated the local car industry highly enough to eventually own three factories supplying it, and to pivot those factories to other products when it ceased to exist. “Some of the best lateral thinkers out of the 140,000 people we employ around the world are here,” Sehgal claims.

The tycoon, who schooled his children in Melbourne and maintains a home there, plans to bend the ear of Liveris about bringing the car industry back to the future. “The economic cost of COVID is going to be so huge, suddenly arguments about $500 or $1000 extra for a car are of no relevance,” he says. “The government should re-do their sums, look at the flow-on jobs and innovation and invite some car companies back.”

Unfortunately for the patriotic Sehgal, he’s about the only manufacturing heavyweight seriously suggesting a return to labour-intensive, assembly line industries like cars. Before its demise, the industry had, for decades, been on life-support through taxpayer and consumer subsidies.

“Maybe in six months’ time, all the emotion and passion will be gone from people saying we have got to be self-sufficient and build new supply chains,” says Ray Horsburgh, a former Smorgon Steel managing director and now a director of listed plastics manufacturing company Pact Group, founded by Rich Lister Raphael Geminder nearly two decades ago. He also sits on the board of British billionaire Sanjeev Gupta’s Liberty Steel Group.

“Supply chain managers are going to look at the pricing and say we can’t afford not to buy cheap products from lower-wage countries like China.”

Even then, Horsburgh is optimistic Australia could still double manufacturing’s share of GDP within five years. “I think you could get it into the mid-teens,” he says.

But to do so Australia needs to focus on industries we are already good at – from food production to biomedical technology to chemicals. And it must harness its natural resources. That means relying on coal, at least in the short term, says Horsburgh.

“The environment and greenhouse gases is a big long-term problem that is going to take decades to fix. But to get us out of bankruptcy, to fix this problem now, I think people have got to realise that we are going to have to use coal power.

“We have to get the cost of power down so we can keep people working and we can keep jobs going. I know, from the packaging business I’m involved in, that if you get the power costs right, we are very competitive. It’s not to do with labour rates or productivity. We are closing coal power stations down – maybe you have to delay that a year or two. The effect on the environment is bugger all.”

Gordon Martin doesn’t need convincing the high cost of power could cost Australia a manufacturing-led recovery. His family’s Coogee Chemicals turned a $20,000 investment in a copper sulphate manufacturer in 1972 into one of the country’s biggest chemical companies that underpins his $663 million fortune. When he speaks to AFR Magazine, he’s beyond frustrated.

High gas prices on the east coast forced the closure of the company’s methanol plant in Victoria in 2016. In Queensland, Coogee used to sell xanthates – a chemical used in mining – to Glencore. But energy costs have made Coogee less competitive and Glencore has switched to a Chinese supplier. Martin’s business is faced with a double-edged sword. On the one hand the resources industry has driven demand, and profits, for many of its products, including cyanide to extract gold. Yet, despite the nation’s bounty of natural resources, long-term contracts for cheap gas are hard to find.

The oil and gas industry has long argued quarantining gas for local consumption would stifle new investment and cost jobs in the resources sector. Martin describes that as “absolute bullshit” and says the domestic gas policy does not work and now is the time to be bold on energy policy. He is arguing for a national interest test for the gas majors for new developments. Slashing red tape should be a priority too.

“Today’s traumas should be used to cut through some of the bureaucratic red tape in getting anything worthwhile done. The politicians have to have enough balls to get out there and … make it so we have a sustainable future.”


So what’s the role of government in all of this? And what might the Nev Power-led National COVID-19 Coordination Commission recommend? Power doesn’t believe in gas reservation policies, saying instead that he believes in the economics of the market. That means lifting the supply of gas, especially in NSW and Victoria where development is restricted. Oil and gas majors would be stopped from sitting on undeveloped assets for too long. Approvals for new projects should be sped up.

For Power there’s a sense of urgency – if we don’t get this right and capitalise on a lower currency, cheap debt and market fundamentals, it could be one of the great missed opportunities from the coronavirus crisis.

“There’s an opportunity to establish new businesses,” he says. “Once they’re established and up and running, then they are able to be much more competitive. But we need to get over that initial start-up and investment phase while the Australian dollar is low.”

Pratt wants the government to accelerate the rate at which business can depreciate machinery to make things. “[Trump] reduced corporate tax from 35 per cent to 21 per cent but the sleeper in that bill was that you could now write off capital in one year instead of seven years. Accelerated depreciation of new machinery investment would be something that would stimulate manufacturing.”

Pratt is one of few Rich Listers to make serious money from manufacturing. Of the 200 on the list, just seven operate substantial manufacturing assets. But interest is growing. For instance, while Lang Walker’s estimated wealth of $4.67 billion is built on property assets, he is building up investments in medical technology, including a 42 per cent stake in medtech group Next Science, which owns patented technology that attacks superbugs.

It’s this sort of high-tech manufacturing the smart money sees value in. But the odds are long. A tax shake-up, unlocking cheap energy and snatching a laser focus to develop what we’re really good at will be critical to success. Manufacturing veterans know it’s only a matter of time before supply chains repair.

But if there’s anyone who can take charge of the situation, Horsburgh reckons Power is the man for the job. He remembers when Andrew Forrest rang to ask him about Power, who he was considering as his potential successor at Fortescue. “I said, well if you want someone who will draw the sword, charge and take no prisoners, he’d be the right man.”

The June issue of AFR Magazine is out on Friday, May 29 inside The Australian Financial Review. Follow AFR Mag on Twitter and Instagram.





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