The Future of Manufacturing in South Australia – Political Perspectives

The Future of Manufacturing in South Australia Political Perspectives

Consistent with most OECD nations, domestic manufacturing has declined in South Australia over the past decade – falling from 9.7 percent of industry growth value added in 2011-12 to 6.3 percent today.

The state’s new advanced manufacturing strategy seeks to reverse this trend. It focuses on place-based innovation and value-adding sectors like defence, health, space and green hydrogen.


South Australia has many competitive advantages in the manufacture of high value, low carbon goods and services that can be exported globally. These include a skilled local workforce, world-leading research and development capabilities in frontier technologies, such as the Internet of Things, cyber security, augmented and virtual reality, blockchain, and Artificial Intelligence (AI), and the ability to access premium low carbon products from its natural resources.

However, the state’s manufacturing output has declined since peaking in 2016 – in part due to the COVID-19 pandemic and increased focus on decarbonisation. In addition, the global economy has shifted to one where manufacturers are competing on design, quality and innovation rather than price.

Despite these challenges, South Australia’s advanced manufacturing sectors can grow and play an important role in the state’s economic future. The government is working closely with industry, education, unions and community stakeholders to identify these advantages and develop a plan to grow the sector.

This strategy will be guided by the findings of a recently completed economic analysis of South Australia’s advanced manufacturing sector that identifies opportunities for growth. The analysis also recommends policy and program actions to achieve these opportunities.

Among the actions the state will take is to invest in its key strengths, such as the production of medical and energy-related technology, green metals and minerals, and food and beverage. It will also expand its infrastructure, such as the Tonsley Innovation District and its biotechnology hub, and increase capacity for its growing research and development sector.

Further, the state will make it easier for small businesses to access government support. This will be achieved through reducing red tape and improving the quality of government services. It will also focus on supporting Aboriginal and Torres Strait Islander business owners and those with a background of employment in the defence or health industries.

Health-Related Advanced Manufacturing

The state’s health-related advanced manufacturing sector is a promising area for growth. This pillar of the economy, which includes medical technology, pharmaceuticals and biotechnology, is set to benefit from the growing demand for healthcare products as the population ages. The adoption of industry 4.0 technologies is accelerating this trend, enabling businesses to design and manufacture medical devices and medicines more rapidly, cost-effectively and to a higher standard than ever before.

The emergence of high-value, innovative products and services is expected to create new jobs across the sector. This, in turn, will further stimulate private investment in South Australia’s health-related advanced manufacturing sector. The South Australian Government recently opened the inaugural round of its $122 million Economic Recovery Fund (ERF), which will offer $20 million in co-investment with successful businesses and organisations through grants or concessional loans. The ERF has been established to help businesses adapt to changing national and international economic conditions, ensuring they remain competitive in the face of decarbonisation, geopolitical uncertainty, disruptive supply chains, and emerging technologies.

This funding initiative is targeted at a number of industries, including advanced manufacturing and regional tourism infrastructure. The former focuses on building up the capacity of existing manufacturers to improve their productivity and innovation, while the latter aims to strengthen tourism infrastructure in South Australia’s regions and boost the economy.

Besides bolstering the state’s thriving tourism sector, regional tourism initiatives are also designed to reduce barriers to entry and support the development of high-quality, sustainable tour offerings using indigenous products and experiences. Moreover, the government’s $122 million investment in a national tourism strategy will support the establishment of South Australia as an internationally renowned tourist destination.

Green Metals and Minerals

Besides the obvious economic benefits of green metals and minerals, a new emphasis on clean energy is also creating opportunities. The global green transition is boosting demand for these raw materials as consumers replace fossil fuels with renewables. These green metals include lithium, nickel, cobalt and copper. They are also critical for energy storage batteries, which can reduce the need for expensive grid upgrades. In addition, the rapid expansion of solar and wind power to meet climate goals will lead to a tripling of mineral demand for these sectors by 2040.

The SA government is positioning itself for these market shifts by re-envisioning manufacturing and investing in research and development. The State’s advanced manufacturing strategy is aimed at increasing the sector’s share of the economy from six to 10 percent, and growing employment and expenditure on business R&D. The strategy’s mission is to “capitalise on the global green transition, build local talent and position South Australia as a partner of choice in an increasingly insecure world,” says Deputy Premier and Minister for Industry, Innovation and Science Susan Close.

In a sign that the state’s politicians are taking this seriously, they have just launched a $10 million extension of the Tonsley Innovation District, which is a leading center for automation and simulation software. This will help small-to-medium enterprises reimagine their factories and gain a foothold in critical supply chains.

The State’s leadership in renewables and investment in hydrogen production are generating opportunities for the manufacture of premium low-carbon products like green metals, minerals and fuels that capitalise on the global green transition. This will make South Australia a hub for manufacturing of the new technologies needed to tackle climate change and security challenges.

Food and Beverage

South Australia’s food and beverage industry contributes to the state’s economy in a number of ways, including by providing employment and export revenue. It also provides significant R&D spend, and its workers have some of the highest levels of skill in the country.

With the world undergoing a rapid shift towards a more sustainable model, companies involved in this sector are increasingly competing on design and quality rather than price. This is seen in the growing interest in craft manufacturing, where skilled and experienced artisans work alongside digital technologies to produce high-end custom products. It is also reflected in the increased focus on building local supply chains to reduce exposure to global market disruptions such as COVID-19 and wider geopolitical uncertainty.

For example, the global beverage company PepsiCo has a complex supply chain management system that ensures its carbonated beverages are consistently available to customers. This includes sourcing raw materials from quality suppliers, implementing automation to streamline operations, and directly delivering to stores to minimize the time their products spend in the supply chain.

These are just some of the examples of how the manufacturing sector in South Australia is evolving to meet the challenges of a changing world. The state government is also supporting the industry through its initiatives. In particular, the $90 million Next Generation Manufacturing Investment Programme supports businesses investing in capital projects in areas of high value manufacturing.

In addition, the state’s research incentives and tax offsets are helping to foster innovation. And, the state’s universities and hi-tech precincts are helping to connect businesses with the experts they need to grow their operations.

Renewable Energy and Green Hydrogen

South Australia is already well-known as a leader in renewable energy and green hydrogen production. This is an important strategic direction for the state, particularly as global demand for high-value low-carbon products rises in line with climate change mitigation. It is also a way for the state to diversify its economy as the world moves away from fossil fuels.

The state’s current economic recovery fund (ERF) has a focus on manufacturing innovation and regional tourism infrastructure. The ERF will co-invest with successful businesses and industry, providing grants and concessional loans. The manufacturing innovation funding stream is aimed at supporting small-to-medium enterprises that can demonstrate their advanced technology, uniqueness, competitive neutrality and value proposition for their project.

Food and beverage manufacturing is the largest component of South Australian manufacturing – accounting for almost three-quarters of the sector’s industry value-add. It is predicted to grow even further as the adoption of industry 4.0 technologies accelerates, and there is significant opportunity for agribusinesses to develop their capabilities in the emerging market for agriculture-related products.

During the 1930s, premier Donald Dunstan sought to position South Australia as Australia’s technological, design, social reform and cultural centre, and made major investments in agriculture, shipbuilding and metals industries. This image-conscious policy drew the attention of international investors, helping to offset declines in coal, gold and other minerals mining. It helped the state avoid recession and maintain growth for its industrial base, although it led to a higher unemployment rate than the national average. There were nevertheless fewer and less damaging strikes than in other parts of the country. The union movement was strongly supported by the state government, and the Labor Party continued to appeal to middle strata of society for electoral support.