Manufacturing activity plunging; where to from here?

Activity in Australia’s manufacturing sectors has fallen for the eleventh time in 13 months, propelling members of the industry to call on government for answers to some tough questions about the industry’s future in Australia.

According to the latest PMI results, manufacturers experienced an extremely tough month in September, with the Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI) down 1.0 full point to 42.3 — which is well below the 50-point level separating contraction from expansion. 

Even Australia’s most reliable industries, including the food and beverage sector, were among the worst-performing during the month, raising concern from the industry.

“Caution” is the word on the lips of every manufacturing company this month, says Australian Industry Group (Ai Group) chief executive, Heather Ridout.

Talk in the media of a new global financial crisis isn’t helping the matter, either. 

“Caution continues to be the order of the day with most respondents uncertain about the outlook and citing little visibility in relation to business conditions beyond the short term,” said Ridout.

“The usual suspects of weak domestic demand, the strong Australian dollar, increased overseas competition and uncertainty surrounding proposed carbon pricing, continue to weigh on the sector.”

Surprisingly, the food and beverage sector experienced the deepest decline in activity, along with wood products and furniture, transport equipment, and miscellaneous manufactures.

Where to from here?

This latest PMI result comes just in time for two important meetings for the sector this week, the Tax Forum and the Jobs Forum, from which Australian manufacturers hope to find some answers. 

"The further decline in the manufacturing sector recorded by the Australian PMI is further evidence that the Tax Forum’s focus on the pressures of the two speed economy is appropriate,” said Ridout.

“Further, the fact that the Australian PMI is suggesting 11 consecutive months of job losses heightens the importance of focusing on the pressures on manufacturing jobs at the Jobs Forum.”

This Thursday’s Future Jobs Forum “must” present some answers for Australia’s flailing manufacturing companies, according to AMWU national secretary Paul Howes.

“We can’t just bury our heads in the sand – we’ve got to face the reality of the manufacturing crisis that is before us,” he said. 

“Australia is currently facing complex and challenging macroeconomic factors as a result of the mining boom, and these factors are driving clear structural changes to our economy.  

“But manufacturing employs a million people, five times that of mining – the mining sector can never hope to replace jobs lost in manufacturing over the course of the boom.

“That’s why the AWU and AMWU are putting forward a practical plan to ease the pinch being felt by domestic manufacturers – focusing on local supply, innovation and productivity, a strong anti-dumping regime and every effort to stem international currency manipulation.”