The state of the nation

It seems obvious enough - buying Australian made supports local business, keeps money in our economy and ensures your installs meet the mandatory safety standards. Whether apparent or not, the problem and, let’s face it, the reality, is that tougher economic conditions tend to make cheaper overseas alternatives more attractive, creating a hard-to-ignore temptation, in some cases, to forgo quality for the sake of winning the job. That’s not to suggest that all product made outside of Australia is of lesser quality ... far from it in many cases, but an increase in ‘cheap’ imports has resulted in a push by Australian manufacturers to educate the domestic market and encourage local purchasing.

So ... Australia is headed towards the inevitable end-point for developed nations in the information age; local manufacturing will slow as companies look offshore in an attempt to reduce overhead. More and more production will move to nations that enjoy lower labour costs, particularly in the case of high-volume product. We will shift to a service and information-only economy and most of the world’s fabrication will be carried out by poorer, less-developed locations with a high population willing to work for less.

Really? Well, that’s the economic theory, which in the longer term may or may not prove to be true, and it’s certainly the impending scenario that is preached continually in Australia. The problem with this thinking is that it bears absolutely no reflection on the situation as it stands today, particularly within the electrical and electronics manufacturing industries.

Australia has a long history of giving it a go. We have a seemingly disproportionate and enviable list of world-changing technological inventions to our credit. You’ve heard it all before: the orbital engine, black box recorder, spray-on skin, ultrasound, power board, Wi-Fi ... the list goes on. No doubt about it, we’re an entrepreneurial lot.

From that very industrial spirit, we bred many local manufacturers across a range of industries that supply the electrical, data and communications markets: electronics, lighting, controls, distribution, cable. Sure, the landscape may have shifted slightly in the last few years; the maturity of the industry and a number of previously privately Australian-owned and -operated businesses looking to take it to the next level came on to the market and were snapped up by large multinationals. Some of the more high-profile acquisitions in recent times were Clipsal (now Clipsal by Schneider Electric), HPM Industries (now HPM Legrand) and Dynalite (now Philips Dynalite). While many decried the death of Australian industry at this change, the reverse appears to be true. In all three named cases, the new parent company invested substantially in the local business and pledged a commitment to keeping manufacturing and, by nature, jobs within Australia. That’s encouraging stuff and confirmation of the state of the nation ... our industry is alive and well.

That may well be, but the long-term viability is only as good as the purchasing mentality of the local market. In 2011, the Australian Cablemakers Association (ACA) was founded with a view to campaigning against non-compliant cable entering Australia. The group was established with three original members and has since expanded to include others: Advance Cables, Olex Australia and Prysmian Power Cables & Systems Australia welcomed Tycab Australia, Australia Pacific Electric Cables, Bambach Wires & Cables Pty Ltd and Triangle Cables, bringing the total membership number to seven. The ACA successfully lobbied the government for an enquiry into the alleged dumping of cable exported out of China into Australia. Ultimately, the investigation determined that product was not dumped, but the ACA continues to represent local manufacturers in interaction with government and industry bodies, calling for independent testing of product in order to stamp out non-compliant goods hitting our shores. That this type of action is warranted is a very clear indicator of the pressures that local manufacturers are facing.

The strong Australian dollar doesn’t help - while it’s great news for consumers when it comes to buying clothes, books, music and IT equipment online from the US or Europe, it’s not so hot for anyone trying to make a buck exporting product overseas or to legitimately compete on the home front.

Most of the recent manufacturer-driven industry educational campaigns centre on the risks associated with using cheap imports. Rightly so, as the risks are real and the penalties steep. Importing and using product that does not comply with Australian standards can get you into considerable hot water; there are significant financial consequences, potential criminal charges, nullification of insurance cover and licence termination to consider. Under Australian Electrical Safety law, the importer of the product is recognised as the distributor, so it’s more than just a few mouse clicks and saving a dollar here and there.

Unfortunately, that’s not the worst of it. Trademark infringement is another matter - if goods are found to be counterfeit, the associated repercussions are ugly: legal action, prison time and hefty fines. The practice is way more common than you may think. So much so that the International Electrotechnical Commission (IEC) released a report in 2011 titled ‘Piracy in electrical and electronic products: anti-counterfeiting best practice and strategies’.

The commission estimates that the annual global counterfeiting and piracy business exceeds US$650 billion and advises that electrical and electronic products are number two on the list after pharmaceuticals. In short, it’s big business. More alarmingly, the IEC is able to draw direct links between counterfeiting and international organised crime, suggesting that participation helps finance other forms of criminal activity.

The report cites a study commissioned by the International Chamber of Commerce (ICCWBO), which found that 80% of consumers in developed and developing nations regularly purchased counterfeit product with little awareness, remorse or fear of consequences. Presumably a Rolex knock-off bought on the streets of Bangkok doesn’t pose the same potential safety issues as electrical products for installation in Australian homes or businesses, but that particular statistic indicates a lack of mindfulness in purchasing behaviour that is too easily transferred from one scenario to the next.

The IEC makes many recommendations to combat the process. Some are aimed at manufacturers including suggestions around the establishment of trademark, copyright, design and patent registrations, as well as implementing quality control and inspection processes. Other ideas address the consumer end of the spectrum.

The IEC nominates the most powerful deterrent to the end user as an understanding of the risk and dangers to themselves, their families and their communities. It also states that “consumers look for evidence that the government views counterfeiting as a serious problem which has consequences”. This suggests that there may be room for a government-funded program to educate the end user here in Australia.

At a business level, why then does the counterfeiting industry still thrive? If it’s not for a lack of ready information or equivalent locally made alternatives, can it really only come down to price? If so, the sad truth is that a single purchase to save a bit of cash can have catastrophic consequences, endangering lives and worse. The best-case scenario isn’t much better either - the impact on local industry starts with a decline in competitiveness, followed by reduced profit and an inability to reinvest, eventually making offshore manufacturing a more attractive alternative … and it’s a slippery slope from there.

As members of Australian industry, we owe it to ourselves to take steps to support local manufacturing, particularly during times when things may be a little tougher financially. Maintaining the integrity of the local market will go a long way to ensuring a sustained healthy and buoyant economic future for our industry and every purchase counts.