Industry Minister Karen Andrews has signalled the Morrison government will not back down on planned cuts to research and development incentives, despite promises to help jumpstart Australia's domestic manufacturing industry.
During an address at the National Press Club on Wednesday, Ms Andrews said the coronavirus pandemic had exposed gaps in Australia's manufacturing capacity, and there would be "significant changes" once the crisis abated.
While Australia was not likely to start building iPhones, government would look to build on our "comparative strengths" in mining and agriculture and find ways to "value-add" on raw materials previously marked for export.
"Australia is actually very good at digging things out of the ground, putting them on a ship and sending them overseas and paying a lot of money to buy them back as a finished good. And that that needs to change," Ms Andrews said.
"We are looking at our rare earths, critical minerals and looking at battery manufacturing here in Australia. It won't be to manufacture every single type of battery, but we're looking at what those niches can be.
"The second very obvious one is in food. We are very good and well regarded food producers here. About 25 per cent of our manufacturing is food based.
"So we have enormous opportunities to value-add along the way with our food. Many of our nearest neighbours, in particular, are very interested in not only our meat, processed meat products, but also what we can do with our cropping to produce processed goods. So food creates a real opportunity for us."
The government would also look at slashing red tape, using its purchasing power to buy local, and reducing the cost of energy for manufacturers.
"A factory can be proposed, approved, built and operational in America in less time than it takes to jump the very first approval hurdle here in Australia," Ms Andrews said.
However she ruled out propping up the industry through subsidies.
"This is not about creating the past or reliving a golden era. It's a newer, richer and more highly developed industry that we're cultivating," Ms Andrews said.
She also dismissed questions about ditching proposed cuts to the Research and Development tax incentive scheme.
The bill, revived late last year, drastically curtails the tax breaks businesses can claim on research and development, cutting $1.8 billion from the scheme over four years.
Labor senator Kim Carr said the minister would dump the cuts if she was "fair dinkum about backing Australian industry".
Senator Carr said there had already been a 12 per cent decline in business expenditure on research and development since 2013, and slashing the incentive would push R&D offshore.
"Cutting the R&D Tax Incentive is not the way to revitalise manufacturing in this country," Senator Carr said.
The Australian Information Industry Association warned the proposed cuts was "an incredible challenge to current and future operating businesses in Australia, especially as we start to rebuild and recover our economy post COVID-19".
"We strongly urge the government to reconsider and reject the current proposal," chief executive Ron Gauci said.
However Ms Andrews said supporting manufacturing did not necessarily mean "throwing more money at R&D".
"Our investments in R&D need to be effective and targeted ... The government already invests about $9.6 billion every year, supporting science, research and innovation," Ms Andrews said.
"And for the manufacturing sector, there's also the significant contribution of non-R&D innovation, which rarely gets the attention or the recognition that it deserves. So many businesses are innovating every single day. They're coming up with new ways of doing things. They're improving practices. They're adopting new technologies. They're inventing new devices. These don't fall under the R&D banner, but it's very much an economic driver."