Beyond Production: The Role of Advanced Manufacturing in Driving Regional Competitiveness in Australia

Following the supply chain disruptions caused by COVID-19, policy discussions around the globe centred on the concept of sovereign capability (Worrall et al., 2021) and measures to improve economic resilience (Rojas et al., 2022). Like many other first-world countries, Australia aims to grow advanced manufacturing, primarily supported by its new industrial policy entitled Future made in Australia. This study investigates its impact on Australian regions, particularly their competitiveness in attracting economic activities. Potter (2009) defines regional competitiveness as a region’s relative capacity to attract mobile factors of production such as labour and capital. While many factors contribute to regional competitiveness, including factor endowments and agglomeration economies (Budd & Hirmis, 2004), we investigate the role of advanced manufacturing in defining a region’s competitiveness. In doing so, we first measure the regional economic complexity of advanced manufacturing (Fritz & Manduca, 2021; Mealy & Teytelboym, 2022), which reflects the productive structure of sub-state regions at the Statistical Area 3 level (SA3). The study applies a spatial econometric analysis in which SA3-level regional characteristics (2021), including economic complexity, are the explanatory variables, and net business entry (2023), serving as a proxy for the mobility of production that determines competitiveness, is the dependent variable. The findings suggest that advanced manufacturing significantly defines a region's competitiveness in creating more economic activities. Therefore, the new industrial policy is expected to not only grow manufacturing activities but also contribute to creating business opportunities across industries, making it a key determinant of regional development in Australia.