Prime Minister Scott Morrison has announced details of the government's plan to build Australia's manufacturing capability and hinted next week's Budget will include an announcement on the R&D Tax Incentive.
Mr Morrison used his speech to describe the magnitude of the COVID-19 pandemic, saying its impact on the global economy has been 45 times greater than that of the 2007 global financial crisis.
He said next week's 2020-21 Budget has been designed to 'cushion the blow' of the 2020 pandemic. According to the prime minister, 670,000 jobs have been lost or reduced to zero hours as a result of the pandemic, but that another 700,000 jobs would have been lost without programs like JobKeeper.
Mr Morrison said the government would invest $1.5 billion to build manufacturing in six priority areas, including resources technology and critical minerals processing; food and beverage manufacturing; medical products; clean energy and recycling; defence; and, space.
Most of the funding will be set aside for the $1.3 billion Modern Manufacturing Initiative. It is designed to attract major projects with funding of up to $80 million in collaboration with companies, organisations and state governments.
Mr Morrison said the relevant sectors will lead the development of industry roadmaps.
He said a review is underway of how Australia's supply chains have performed during the pandemic and that the government will invest $107 million to address any identified vulnerability.
The prime minister said manufacturing currently accounts for around one quarter of all research and development in Australia.
He said Australia will not be competitive in high volume low-cost production but needs to focus on specialised advanced manufacturing.
"It is not just about what we make but how we make it," he said, adding the focus will be on existing areas of strength and new opportunities of national interest.
The prime minister said policy-makers will give consideration to the wider levers that are 'foundational' in the creation of a favourable investment environment for manufacturing. He highlighted taxes and industrial relations.
Importantly, he also said the Treasurer will make announcements about research and development incentives in next week's Budget.
The biotechnology and life sciences sectors have consistently called on the government to scrap the proposed cut in the R&D Tax Incentive.
On the medical manufacturing priority, Mr Morrison pointed to companies like CSL, Cochlear and ResMed as examples of what Australia could seek to emulate.