On the one hand, the Australian Industry Group’s latest PMI has sparked fears that the sector is going backwards.
Ai Group chief executive Innes Willox said: “While Australia’s manufacturing sector continued to grow in May, performance was mixed across the range of manufacturing industries and there are signs of further softening in the months ahead.”
Others argue that the sector is merely in a period of transition, and that some areas have excellent prospects. Either way, SMEs in the manufacturing sector need access to funding if they are to invest, transform and grow.
How are manufacturers changing?
The days of big, dirty factories and low-skilled jobs are long gone, and most small manufacturers in Australia today operate up the value chain, making advanced products that are sold to other businesses around the world.
Australia’s national science agency, CSIRO, argues that further transformation over the next two decades presents a huge growth opportunity for those manufacturers who can find a niche in the modern integrated business ecosystem.
In its Advanced Manufacturing Roadmap, CSIRO argues that turning this opportunity into reality will require significant technological innovation by public and private research communities.
“Over the next 20 years, Australia’s manufacturing industry will evolve into a highly integrated, collaborative and export-focused ecosystem that provides high-value customised solutions within global value chains. The sector will focus on pre-production (design, R&D) and post-production (after-sales services), value-adding, sustainable manufacturing and low-volume, high-margin customised manufacturing,” it said.
While this is a positive vision for the sector as a whole, it is clear that for smaller operators, significant investment in people and equipment may be necessary to take part.
Where should the money come from?
With the Australian economy faltering, there have been renewed calls for what is generally termed “stimulus”. This is shorthand for a cash injection, either from the government or the Reserve Bank.
However, it is somewhat unclear where exactly these broad measures of largesse end up. Certainly, if the vision outlined by CSIRO is to come to fruition, funding for public research bodies such as universities to work with industry will be necessary.
Such an arrangement would entail manufacturers paying that assistance back by employing the smart young workers coming out of the university system. In a scenario where business is booming and Australian high-tech products are in global demand, firms can do this through equally smart funding.
For example, an Australian manufacturer which has developed an exciting product for the global market and needs to increase its workforce to meet orders can use Export Finance. This will ensure it has enough money in the bank to pay its growing wage bill, secured against the value of the payment it knows is coming.
Trade Finance, Invoice Finance and Supply Chain Finance are all part of a modern, flexible mix of funding that allows small and medium firms to grow at their natural pace. All harness the money that these firms are due to receive months down the line, removing the cash-flow gap that used to stop so many businesses in their tracks.
In other words, with smart fintech finance to match their own sophisticated business models and products, Australian manufacturers can create their own stimulus, and every cent will go where it is needed!
Steven Furman is currently the executive director of TIM Finance.