Identifying and developing national strategic industries

Australia has long had a tough relationship with the ‘tyranny of distance’. On one hand, the nation’s populace has treated it with disdain and hostility, while Australia’s political and strategic leaders have recognised the importance of geographic isolation.

The rise of Indo-Pacific Asia means the ‘tyranny of distance’ has been replaced by a ‘predicament of proximity’. China, India, Indonesia, Thailand, Japan and several other regional nations are reshaping the economic and strategic paradigms with an unprecedented period of economic, political and arms build-up, competing interests and rising animosity towards the post-World War II order of which Australia is a pivotal part.

The rise of these economic powerhouses – driven by a combination of increased resource, energy and consumer goods consumption and the development of an advanced domestic manufacturing base – places Australia in both an opportune and precarious position, as the growing economic wealth has translated to increased demand for resources, energy, agricultural and consumer goods, but also increased investment in defence capability.

This rapidly evolving global and regional environment, combined with the increasing instability of the US administration and its apparent apprehension to intervene or at least maintain the global rules-based order following the radical shift in US politics, also forces Australia to reassess the strategic calculus – embracing a radically new approach to national security strategy and policy – more specifically, the role industry plays in supporting long-term national security. 

Certain industries, including heavy manufacturing like steel production, shipbuilding, auto-manufacturing, aerospace and chemical engineering, resource and energy exploitation and agricultural output, serve core components of a strategic industry. Meanwhile, the growing complexity of the regional and global strategic paradigm supports the necessity for a cohesive industry development strategy. 

Recognising the opportunities and potential challenges facing Australia – how does the nation respond to the rapidly evolving regional environment, while also identifying and supporting the development of critical national strategic industries in an increasingly competitive era?

Nationally critical heavy industries 

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Australia as a nation, like many Western contemporaries, has been an economy and nation traditionally dependent on heavy industries – capitalising upon the continent's wealth of natural resources including coal, iron ore, copper, zinc, rare earth elements and manufacturing, particularly in the years following the end of the Second World War. 

However, the post-war economic transformation of many regional nations, including Japan, Korea and China, and the cohesive, long-term, nation building policies implemented by these nations has enabled these countries to emerge as economic powerhouses, driven by an incredibly competitive manufacturing capability – limiting the competitiveness of Australian industry, particularly manufacturing. 

Recognising this incredibly competitive global industry and the drive towards free trade agreements with nations who continue to implement protectionist policies buried in legislation, Australia needs to approach the development of nationally significant heavy industries in a radically different way, recognising the failures of the past and the limitations of Australia's past incarnations of heavy industry. 

Identifying these industries is the first step in building a cohesive, long-term plan as part of a broader National Strategic Industries Act – using the legislative power of government to counter-balance industry development policies of allied, yet still competitor nations like South Korea – which leverages the industrial development policies of export oriented industrialisation (EOI) to develop its economy into a major economic and modern, advanced manufacturing powerhouse. 

Water security, agriculture and strategic resource reserves 

As the driest permanently inhabited continent, Australia is dependent on reliable access to water both for consumption and industry use, particularly the agricultural industry, which is responsible for feeding both Australia's growing population and increasingly the populations of the Indo-Pacific's rising powerhouses. 

Both agriculture and water security serve as pivotal components of a truly holistic nationally strategic industries policy and the broader introduction of a National Strategic Industries Act – embracing the potential of these factors, particularly water security infrastructure and the flow on economic impact on traditional heavy industry and manufacturing, combined with the environmental and broader national and regional economic opportunities, should necessitate the inclusion of both in the development of a national policy platform. 

Furthermore, the growing importance of strategic resource reserves, is another area of critical importance within the confines of a national strategic industry support and development platform – contemporary Australia has been far removed from the harsh realities of conflict, with many generations never enduring the reality of rationing for food, energy, medical supplies or luxury goods, and even fewer within modern Australia understanding the socio-political and economic impact such rationing would have on the now world-leading Australian standard of living. 

Transitioning to an advanced manufacturing economy

Despite Australia's widely recognised position as providing a world-leading research and development capacity – supported by both private and public sector R&D programs driven by organisations like the CSIRO – traditional areas of high wage-costs and low productivity in Australia's manufacturing industry, exemplified in the failure of Australia's domestic car industry and in the series of cost overruns and delivery delays on both the Collins and Hobart Class programs, have characterised Australia's reputation as a manufacturing economy. 

Enter Industry 4.0 – the combination of additive manufacturing, automated manufacturing and data sharing, with a coherent National Strategic Industry development policy can compensate and in some cases overcome the traditional hindrances faced by the Australian economy, with public-private collaboration essential to ensuring the long-term sustainability and success of Australia's defence industrial base and broader manufacturing economy.

While industry largely provides the technological expertise, government policy provides the certainty for investment – particularly when supported by elements of Australia's innovation and science agenda combined with grant allocation and targeted, contractual tax incentives (signed between the Commonwealth and the company as a memorandum of understanding) linked to a combination of long-term, local job creation, foreign contract success, local industry content, and research and development programs, which are critical components that can be used to empower and enhance the overall competitiveness.

Australia's position and responsibilities in the Indo-Pacific region will depend on the nation's ability to sustain itself economically, strategically and politically. Despite the nation's virtually unrivalled wealth of natural resources and agricultural and industrial potential, there is a lack of a cohesive national security strategy integrating the development of individual, yet complementary public policy strategies to support a more robust Australian role in the region. 

This is done through a range of government-driven incentives for industry, including corporate tax incentives, employment incentives and payroll tax incentives. Australia's now firm commitment to developing a robust domestic defence capability requires innovative and adaptive thinking in order to expand the capabilities and competitiveness of the domestic industry.

Establishing and implementing a cohesive, innovative and long-term vision for Australia's sovereign industry capability can also serve as the basis for developing, and in some cases redeveloping, a robust, advanced manufacturing economy taking advantage of Australia's unrivalled resource wealth – supporting the broader national security and interests in the Indo-Pacific. 

Let us know your thoughts and ideas supporting the next stages of identifying and developing Australia's national strategic industry capability in the comments section below, or get in touch with This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..