Australian Textile, Clothing & Footwear Industries
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BUILDING INNOVATIVE CAPABILITY REVIEW OF THE AUSTRALIAN TEXTILE, CLOTHING AND FOOTWEAR INDUSTRIES Cover images, from left to right, are courtesy of: Technical Textiles and Nonwoven Association (TTNA); Victoria Carpets; TTNA; TTNA; TTNA; TTNA; TTNA; J Robins & Sons Pty Ltd; and MATERIALBYPRODUCT. Background image courtesy of TTNA. © Commonwealth of Australia 2008 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Canberra ACT 2600 or posted at http://www.ag.gov.au/cca. ISBN 978 0 642 72625 4 Note: The dollar amounts in this report are in Australian dollars, unless otherwise indicated. Disclaimer The material contained within this document has been developed by the Review of the Australian Textile, Clothing and Footwear Industries. The views and opinions expressed in the materials do not necessarily reflect those of the Australian Government or the Minister for Innovation, Industry, Science and Research. The Australian Government and the Review of the Australian Textile, Clothing and Footwear Industries accept no responsibility for the accuracy or completeness of the contents, and shall not be liable (in negligence or otherwise) for any loss or damage (financial or otherwise) that may be occasioned directly or indirectly through the use of, or reliance, on the materials. Furthermore, the Australian Government and the Review of the Australian Textile, Clothing and Footwear Industries, their members, employees, agents and officers accept no responsibility for any loss or liability (including reasonable legal costs and expenses) or liability incurred or suffered where such loss or liability was caused by the infringement of intellectual property rights, including moral rights, of any third person. REVIEW OF THE AUSTRALIAN TEXTILE, CLOTHING & FOOTWEAR INDUSTRIES innovation.gov.au/tcfreview 29 August 2008 TCF Review Secretariat Senator the Hon Kim Carr GPO Box 9839 Minister for Innovation, Industry, Science Industry House, 10 Binara Street and Research CANBERRA CITY ACT 2601 Parliament House Email: [email protected] CANBERRA ACT 2600 Web: www.innovation.gov.au/tcfreview Dear Minister I am pleased to present to you my report Building Innovative Capability, in which I review the Australian Textile, Clothing and Footwear (TCF) industries according to the terms of reference announced by you on 8 March 2008. During the course of the Review, I was impressed by the commitment and enthusiasm of stakeholders and their willingness to make their views known and to contribute to the Review through submissions, consultations and case studies. They also provided me with opportunities to undertake site visits and observe the industries in operation first hand. It seems clear that with goodwill, effective leadership, sound business strategy and appropriate support from government, the TCF industries have a promising future. To help realise this future, I have recommended that for the period ahead the industries should focus on achieving competitive advantage through the development of innovative capability at the enterprise level. I would like to express my appreciation for the insights, expertise and industry knowledge provided by the TCF Review Reference Group: Mr Brian Rush – President of the Council of Textile and Fashion Industries Australia Limited, Chief Executive Officer of Australian Defence Apparel Limited; Mr Phillip Butt – President of the Footwear Manufacturers’ Association of Australia, Managing Director of J Robins & Sons; Professor Peter Forsyth – Department of Economics, Monash University; Mr Rod McKenna – representing the Technical Textiles and Nonwoven Association, Director of double-t innovations pty ltd; Ms Michele O’Neil – National Secretary, TCF Union of Australia; Mr Barry Tubner – National President, TCF Union of Australia; Dr Nigel Johnson – General Manager, CSIRO Client & Partner Relationships; and Professor Suzi Vaughan – Head of Fashion, Queensland University of Technology. I would also like to acknowledge the important contribution to my deliberations made by the leaders of other concurrent Reviews, Dr Terry Cutler, the Hon Steve Bracks, and Mr David Mortimer AO. Dr Phillip Toner of the Centre for Innovation Studies at the University of Western Sydney and Associate Professor Richard Denniss of the Crawford School of Economics and Government at the Australian National University provided invaluable support in the areas of economic and industry analysis. Finally, I would like to thank Cecilia Wood, Linda Drummond, Luke Murray and Rachel Searl of the departmental Secretariat for their superb assistance during the conduct of the Review and in compiling the report. It was a pleasure to work with people of such high calibre and dedication. I commend the report Building Innovative Capability to you. Yours sincerely Professor Roy Green Reviewer Review of the Australian Textile, Clothing and Footwear Industries CONTENTS EXECUTIVE SUMMARY vii 1. WHY THIS REVIEW 1 2. WORLD COMPETITIVE ENVIRONMENT 7 3. AUSTRALIA’S TCF INDUSTRIES 19 4. evaluation OF PROGRAMS 49 5. CHANGING ROLE OF industry POLICY 83 6. FUTURE DIRECTIONS 99 APPENDICES 119 LIST OF shortened FORMS 125 REFERENCES 129 v I don’t want to be Prime Minister of a country which doesn’t make things anymore. I don’t want to be Prime Minister of a country that doesn’t manufacture things anymore. I want there to be a long term manufacturing industry for this nation. Kevin Rudd Prime Minister of Australia There is a broad consensus that a focus on innovation is critical to the survival of manufacturing in Australia – both for revitalising mature industries and for the development of sunrise industries. Indeed, innovation is critical for competitiveness across all sectors of the economy... In the 21st century, innovation policy is industry policy. Senator the Hon Kim Carr Minister for Innovation, Industry, Science and Research There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Niccolo Machiavelli EXECUTIVE SUMMARY CONTEXT OF THE REVIEW Australia’s TCF industries are vibrant and diverse, encompassing a range of activities from processing to manufacturing and marketing, underpinned by design and innovation. While the value of TCF output has fallen in recent years, it is still a substantial $2.8 billion with exports of $1.6 billion. These industries also employ over 48,000 workers around the country with many more in home-based employment. When TCF retailing and wholesaling are included, value add increases by a further $7.5 billion and employment by around 160,000, increasing again when growth sectors such as design and business services are counted in the total. However, it is generally recognised that Australia’s TCF industries, as in other developed, high wage economies, face the challenges of low cost competition in high volume ‘commoditised’ market segments, pressure for constant and creative evolution of value adding fashion products and a relentless demand for new technologies and skills across the industries, especially in technical textile production and ‘smart fabrics’ where competitive advantage is increasingly driven by knowledge and innovation. TCF industries around the world have responded to these challenges in different ways. In some countries, they have contracted to the point where the critical mass of industry linkages, capabilities and skills necessary for viable manufacturing have almost ceased to exist, whereas in others they have successfully repositioned in the context of globalisation and technological change to take advantage of new and emerging market opportunities. Evidence to this Review demonstrates that the key success factor for the TCF industries, as for industries more generally, is the development of innovative capability at the level of the enterprise and workplace, which is driven not only by research and technology development but also by an increasing emphasis on business model transformation, market-led organisational changes and the integration of firms into collaborative networks and supply chains. The Review maintains, contrary to the manufacturing sceptics, that Australia’s TCF industries have a promising future, but this can only be achieved through a concerted effort to differentiate their products through uniqueness, product quality and design, branding, quick response and new approaches to supply chain management, with a clear emphasis on corporate social responsibility in the application of labour and environmental standards. Moreover, the Review recognises that there is an important role for public policy in the context of Australia’s emergent National Innovation System in bringing about such a future, and this is reflected in the following series of recommendations which are aimed at encouraging the growth of new TCF businesses as well as enabling existing ones to become more dynamic and competitive with the assistance of productivity- enhancing measures. Productivity Commission modelling for this Review identified costs to the Australian economy associated with tariffs and industry assistance. However, when asked to undertake a ‘sensitivity analysis’ of the impact of an