Australian manufacturers rising orders to start 2022, despite cost challenges

ACCI

The latest ACCI-Westpac report has found businesses are facing material and labour costs not seen since the 1970s energy crisis, despite rising orders to start the year.

The ACCI is warning the surge in oil prices is adding more strain to economic recovery, with businesses in the report flagging supply side headwinds to persist for the rest of the year.

Manufacturers actually enjoyed rising orders in the early months of this year, but post-lockdown recovery will now have to navigate the sharpest material and labour cost pressures in 50 years.

The latest Commerce and Industry (ACCI) and Westpac Survey of Industrial Trends showed manufacturing rose to 56.7 over the quarter, up from 50.8 recorded in December 2021.

Despite rising orders, the survey found input costs are currently the highest they’ve been since 2008. A net of 46 per cent of respondents said costs rose in the March quarter, up from 38 per cent in December.

ACCI chief executive Andrew McKellar said the government needs to implement reforms to assist local manufacturing and resilience within the economy.

“We can’t gloss over some of those tough decisions that are going to need to be made in the next term,” he said.

“There needs to be a real agenda for reform. We’ve got to restart productivity growth. We cannot limp along as we have done … for nearly the past 10 years.”

“Despite the more positive results around manufacturing activity, the survey again highlights that manufacturers face considerable pressures from rapidly rising costs and a shortage of labour and materials,” he said.

“These pressures intensified further in early 2022.”

Mr McKellar said volatility in the global economy had jumped as a result of Russia’s invasion in Ukraine and was evident in the oil markets price jitters.

The survey suggests the impact of Australia’s reopened international border is yet to flow through to the manufacturing sector.

Only five per cent of respondents said they expected profits to increase in the year to come, down from a net 18 per cent in the December quarter.