A Well-Furnished Future
Royal Exhibition Building, Melbourne
Friday, 10 July 2015
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Ms Patrizia Torelli, Chief Executive Officer of the Australian Furniture Association, Mr Cameron Baker, Chief Executive Officer of Manufacturing Skills Australia, Ladies and Gentlemen.
Good morning, and thank you for asking me to open the second day of your conference, Furnishing futures.
The title suggests excitement about new possibilities, tinged perhaps with apprehensiveness.
That is a familiar mix of feelings in all sectors of Australian manufacturing.
All of you will be well aware of the challenges manufacturers have faced since the opening of the economy to greater international competition.
In your industry, competition from imports has been fierce, with Scandinavian-designed packaged furniture made from timber cut in low-wage countries now a common sight in Australian homes.
Conservative ideologues in Canberra and elsewhere like to say that if Australians can’t match products that others can make more cheaply we shouldn’t be trying.
That is pernicious nonsense, confected from a false, textbook notion of competitive advantage.
In real-world economics, competitiveness arises from taking advantage of one’s strengths – strengths that have to be built.
And in the furniture industry, Australia’s strengths are considerable: great design skills, comparatively small units of production close to population centres, and thus the capacity for quick delivery.
We all remember the effect of a very high and volatile dollar.
And the end of the mineral boom has shown what happens when there is too narrow a focus on commodity exports.
Unemployment remains stubbornly high, above 6 per cent, and with a tsunami of job losses coming from the automotive industry that will get worse.
Modern mining is not a labor-intensive industry. It creates jobs during the construction phase but these drop away, as we are seeing.
In the longer term, job creation in a modern economy depends on the existence of a strong manufacturing sector.
A sector that includes industries such as yours, which employs 250,000 people both directly and through the supply chains.
If Australia is to have a high-wage, high-skill future, it is essential that we continue to make things.
The relevant question is not whether we should invest in manufacturing.
It is how we can make Australian manufacturing competitive in a world of low-cost imports.
In a high-cost environment, competition on price is not sustainable.
But price is not the only, or even the chief, measure by which consumers choose a product.
Above all, they expect value for money. Quality is remembered long after price is forgotten.
If they need extra bunk beds because the kids’ friends are coming for a sleepover, they might opt for a cheap pine import, to be assembled at home with much frustration and more than a little cursing, according to an instruction sheet written in a Swedish approximation of English.
But if they are buying pieces they expect to last, to enhance their comfort and the enjoyment of their home, the value-for-money calculation might be done differently.
They might deliberately avoid mass-market, cheaper furniture that would become useless within a few years.
There is evidence that items of this kind are being disposed of in increasing amounts.
The Handkrafted blog estimates, from a survey of Sydney landfill sites, that the average household throws away 24kg of wooden furniture a year.
That is the equivalent of 800,000 three-seater sofas, 1.65 million dining tables, 3.4 million coffee tables or 6.85 million chairs.
When it comes to fitting out an office or factory with the necessary kit – with ergonomically configured desks, chairs and workbenches – getting value for money is crucial.
Choosing the cheapest product could even be counter-productive.
Workers who don’t have properly-designed work surfaces are not only less comfortable, they are less efficient.
If they suffer injuries because their work surfaces are not properly designed, a poor initial choice becomes a long-term cost to the employer and the taxpayer.
The difference between choices based on price and choices based on the best value for money must shape the future of Australian manufacturing.
But building businesses that can successfully market products of superior quality does not happen in a vacuum.
It depends, in the first instance, on access to a workforce with the right kind of innovative design and technical skills.
The supply of these skilled workers, designers and engineers in turn depends on the willingness of governments to invest in the university and TAFE sectors.
It further depends on governments providing the assistance that even the most adept of entrepreneurs so often need to bring their products to market.
That is especially needed in an industry in which most firms are small or medium-sized enterprises.
None of this is about picking winners, to cite the phrase that the ideologues I mentioned earlier are so fond of.
It is about building an economy in which productive investment is driven by a culture of innovation.
Australia has an impressive history of creating innovative products, from the stump-jump plough to WiFi and the dual-flush toilet.
But it has a less impressive history of successfully bringing innovative products to market.
When Labor was in government we sought to change that.
As minister, I introduced Powering Ideas, a 10-year agenda to develop a national innovation system.
This included agencies such as Commercialisation Australia and Enterprise Connect, which provided innovative firms with the sort of assistance I have described.
Enterprise Connect helped medium-sized furniture makers as different as Silver Lynx, from Glenroy in Melbourne, and Joinery Products, from Devonport in Tasmania, to develop business plans aimed at responding to increased competition and technological change.
Those are just two examples from among the 160 furniture businesses that Enterprise Connect helped to build their management capabilities.
In the life of the program, Enterprise Connect helped more than 30,000 businesses. Eight out of 10 say their productivity improved.
But the Abbott Government has abolished Enterprise Connect and many of the agencies established as part of Powering Ideas, cutting more than $2.5 billion from Industry Department programs.
And the Education Minister, Christopher Pyne, is intent on making it harder for young Australians to obtain a university education by deregulating fees and cutting funding for undergraduate places by 20 per cent.
The Government has also cut more than $1 billion from programs that either assisted young people wanting to take up apprenticeships or encouraged firms to take on apprentices.
The Government defends its cuts as necessary to reduce the Budget deficit.
Well, that was last year’s excuse. This year that sort of talk is not so fashionable.
But cutting public provision of higher and vocational education, and abolishing industry programs that foster innovation, are false economies.
Taking that course won’t generate revenues that restore the Budget to surplus, because the consequence of these drastic cuts can only be to drive down investment.
Investment in our workforce, in our skills, in our capacity to create innovative products for new markets.
In other words, investment in our future.
This country cannot afford to lose its focus on the future.
The title of this conference, Furnishing futures, is indeed well chosen.
Your industry is already showing in a very tangible way what that future can be.
Tables, chairs, cabinets – all items of furniture, whether intended for the home or the workplace – represent two things.
They are products of an industrial process, and they are exemplars of the skill and imagination of their designers.
Australia must invest in both those things.
If Labor returns to government at the next election, we will establish a Smart Investment Fund to increase access to venture capital.
Increasing the flow of capital will help kick-start the industrial process.
But we must also invest in young designers.
We will have more to say on helping manufacturers get access to finance after the Labor national conference.
This is especially important given the banks have been so reluctant to help.
In your industry, innovation must focus on nurturing design talent, and on inserting that talent into the industrial process in the most effective way possible.
In Australia, 21 universities offer courses in industrial design. We must resist changes to higher education that could restrict the flow of graduates the industry needs.
At Labor’s national conference later this month, we will adopt the platform we take to the next election.
The details of the platform will be announced then, but I can say this now: a Labor government will not walk away from public provision of higher and vocational education.
We will increase public investment in science, technology, engineering and maths education – the so-called STEM disciplines, which include industrial design.
We will invest in the skills Australia needs, underpinned by strong technical education.
I also want to mention a further element, which has a particular relevance to the furniture industry.
As anyone who knows me will be aware, I have for many years worn a lapel pin with the Australian Made logo.
I don’t do so merely as a token of support for local industry.
I wear it to remind people that buying Australian-made is economic good sense.
That doesn’t mean excluding foreign products, and it certainly doesn’t mean feather-bedding Australian firms regardless of their performance.
It means recognising that the purchasing decisions we make shape the kind of industries we have, and therefore the kinds of jobs that are available to Australians.
If we want a diversified economy that isn’t entirely dependent on commodity exports, we need to be clever about our purchasing.
That goes for private purchasers but even more for government procurement, because the purchasing power of government extends throughout the economy.
I spoke earlier about a private purchaser deciding whether to choose only on price, or according to the best value for money.
The same applies to governments, which is why government procurement policies should require departments and agencies to take whole-of-life costs, not just bottom-line prices, into account.
All government offices, of course, require furniture.
Furniture of sufficient quality to allow those who use it to do their jobs as efficiently as possible.
Furniture that reflects the best of Australia’s design talent, and which uses Australian timber and raw materials wherever possible.
We know that Australia has the talent and the skill to make such furniture.
Your industry does it every day, and your government should recognise that in its purchasing decisions.
So I want to say to you today that I am confident that Australia’s furniture industry has a bright future indeed.
I say that this industry needs a government in Canberra that will be a reliable partner in building that future with you – a government that not only values manufacturing but defends its role in building a modern Australia.