Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

Today, I want to respond to an article in today’s Australian Financial Review by Alan Mitchell, the economics editor. The article makes the case that Labor Party policy seems to be heading towards the development of physical industry clusters. I do not know what the minister is thinking but, as the minister has established an inquiry into innovation and other inquiries, I think that the minister has an open mind on this as well. Having had a close association with the northern suburbs of Adelaide, which have a strong manufacturing focus and indeed account for something like 70 per cent of South Australian manufacturing output, I have taken a close interest in manufacturing in particular but industry policy in general.

I would like to take issue with Mr Mitchell on a couple of aspects of his criticism of cluster development. Cluster development is not only as he describes it. He talks about Silicon Glen in Scotland being formed to try to match Silicon Valley in California in the United States and indeed refers to the multifunction polis, which was a project, now defunct, that was mooted in Adelaide some decades ago. What I have taken a close interest in is a cluster strategy which does not require that companies be physically located together and for which there is no government funding put into building real estate, as he puts it, where companies can collocate. Rather, what has been particularly successful—in pilot form—in the northern suburbs of Adelaide has been the development of a cluster strategy whereby a number of companies are identified that could be brought together to form a knowledge intensive base which could be used to improve each other’s practices, technology and knowledge and that could often jointly bid for contracts, either domestically or overseas. The synergies invoked by this kind of cluster development have the ability to greatly improve the outcomes for those industries.

I have a close interest in the manufacturing industry and today I want to talk about a success story that has resulted from a cluster strategy that was developed in the northern suburbs through the sponsorship of Playford council and the work of Mr Rodin Genoff, who was a driving force behind this innovative network. The company is Priority Engineering Services. It was founded in 1984 with just three employees. After some expansion, the company moved to the city of Playford and in 1995 they began to export their core range product of metal stamping plant equipment to the Asia-Pacific region, leading to the establishment of a Malaysian office one year later.

The company has gone from strength to strength as a result of its involvement with several other companies in the Elizabeth West Innovation Network. The culmination of that was in 2005 when it launched Australia’s first industry based robotics training centre, which was developed as a result of a joint venture with a leading UK automotive production control system supplier. This centre enables local companies to work with state-of-the-art technology, leading to new applications in factory automation. This joint venture eventually led to the creation of the Beyond Automation consortium. This consortium includes Malaysian robotics experts, a Malaysian financier and a global German engineering and automation firm. Between them, the partners provide know-how, capital and market position, especially in regard to access to Chinese markets.

This is the kind of thing that I would like to see happen. I am not looking to the past to the old type cluster developments. I recognise that we cannot artificially reproduce Silicon Valley type clusters. But, where we have such a strong a basis of a manufacturing industry as we do in South Australia and many small and medium enterprises that by themselves do not have the ability to take up new technology or to develop export regions, then it is entirely appropriate for governments to facilitate those companies being able to skill up their own employees and build their company knowledge and their ability to export. Indeed, I do not see where Australia can go without that kind of approach; without looking to the future for advanced manufacturing, a niche that Australia can fill. I am very proud of the way the northern suburbs of Adelaide have coped with the downturn in the manufacturing industry. I am very proud of how many small and medium enterprises have developed their own innovative technologies. Very often, they need a bit of extra assistance to cope with marketing and the dissemination of their marketing materials to fertile markets—and particularly to fertile export markets. This is where governments can come in and with a small amount of money assist companies like Priority Engineering to develop and enhance their skills.

I have only recently met with directors and staff of Priority Engineering. It is very exciting to be with them because they are very proud of their company, very proud of what they have achieved in a relatively short amount of time, and very proud of their product. Naturally, any company is happy to have a government subsidy, but they are proud to be using it in a very effective way to enable South Australia to continue to be a strong player in manufacturing industries. We all recognise that where there is cheaper labour and fewer rules and regulations, including environmental regulations, then we will not be able to compete in a number of areas of cheap, mass-manufactured goods, but we can still turn our innovation and ability into something that will continue to drive strong manufacturing exports.

In South Australia employment in the manufacturing sector is continuing to fall. I am not a believer in artificially propping up that industry. Subsidies such as tariffs and the multifunction polis type of strategy are strategies of the past and I do not want to revisit them. But that does not mean we should abandon an entire industry and that we should walk away from manufacturing. We have to look at innovative ways to address some support for industry without providing artificial supports such that, if they are withdrawn, the industry would collapse. I want to talk later in a little more detail, if I get the opportunity, about Mitsubishi, because in South Australia in some senses the manufacturing industry—the motor industry and the whitegoods and appliance industries—was formed on that kind of artificial subsidy, particularly tariffs.

I do not think too many people in South Australia are great believers in that kind of subsidy, particularly having been given the example of the multifunction polis, which did not even get off the ground. The manufacturing industry is still very important to South Australia, and there are manufacturing industries that are growing—in particular, structural metal product manufacturing, with a small average annual growth rate of two per cent; fabricated metal product manufacturing, with an average annual growth rate of 2.9 per cent; and electronic equipment manufacturing with an average annual growth rate of 5.7 per cent.

Those are the kinds of companies that are naturally clustered around the northern suburbs of Adelaide and I see it as a logical conclusion that we use the accident of that geographical clustering to create a kind of strategic clustering. People such as Mr Rodin Genoff have the intellectual ability and also the energy and enthusiasm to drive that. Mr Genoff was employed by Playford City Council, and I should congratulate local government in the northern suburbs for encouraging and supporting that innovative work. This all happened at a time when the former federal government provided very little support in terms of sustainable regions funding or any other funding to advance the work that was being done by local government. So I certainly congratulate local government in the northern suburbs for the work that they did nevertheless in promoting the manufacturing centre. Mr Genoff is now doing a consultancy for the European Union in Denmark. He has seen similar opportunities in those European countries.

In Australia we must always run to keep up in the manufacturing sector. We cannot continue to rely on raw exports of minerals or agricultural products, even though I recognise that those industries, although they are primary industries, do generate a reasonable level of technology and services which are extremely beneficial to our country and to my state of South Australia in particular.

In conclusion, I suppose I half agree with Alan Mitchell but I disagree with his view of what constitutes clusters. He says in his final paragraph:

Perhaps like me, you can feel an official cluster coming on. In which case, just remember Silicon Glen.

That was a cluster that was developed in Scotland. I would say to Mr Mitchell, who is a very respected economics editor, that the clusters we are looking at are of the future and will not require the type of heavy government subsidy which, if withdrawn, creates problems.

Again in South Australia, we had a recent example of that, when a Liberal state government encouraged a number of companies to come in, with significant subsidies in terms of providing real estate and buildings and all kinds of rent relief and free land and so on. When that continuing subsidy was pulled back, initially by the Olsen Liberal government, those companies lost their commitment to South Australia. Many of us—I was in the South Australian parliament at the time—learnt a very hard lesson then: that artificial subsidies are not the way to go and that we must work with industries which are embedded in the area or embedded in the state and which are keen to proceed. To me, the strategic cluster theory seems to be the way to go, and I look forward to the development of a pilot project in the northern suburbs, as was announced during the election campaign by the Rudd team.