COVID-19 and the widespread shutdown of global supply chains created opportunities for domestic manufacturers as governing bodies were forced to re-think the value of offshore manufacturing.
In the late 1980s manufacturing was the biggest employer in Australia, with 16.5 per cent of the workforce. Now less than 1 million people work in the sector, accounting for 6.4 per cent of jobs.
“In Australia’s case, however, we’re using more manufactured goods all the time but we’re producing a smaller and smaller share of those.”
The economic shutdown that has followed the coronavirus pandemic has highlighted the vulnerability of Australia’s supply lines and our dependence on manufactured goods from overseas.
Countries like Germany, Switzerland, and more recently the UK, have shown that being a high cost economy doesn’t mean that manufacturing needs to be abandoned.
Australian onshore manufacturing costs;
- Labour: Wages for Manufacturing in Australia averaged 776.48 AUD/Week in 1983. In the second quarter of 2020, wages reached an all time high of 1381.30 AUD/Week.
- Energy: The manufacturing sector is the third largest consumer of energy, accounting for almost 18% of Australia’s total consumption. Both electricity and natural gas power now costs 80% more than in 2004.
- Exchange rate: Domestically, a depreciation of the Australian dollar encourages substitution from imports to domestically produced goods and services, as imported products become relatively more expensive. However, the Australian dollar has appreciated by 21%, making goods more expensive on global markets.
Dr Stanford has ranked OECD (The Organisation for Economic Co-operation and Development) countries based on their manufacturing self-sufficiency, meaning the amount of goods they manufacture versus the amount of manufactured goods they use.
“Australia has one of the most underdeveloped manufacturing sectors of any industrial country in the world,” Dr Stanford told The Business.
Australia needs a strong domestic manufacturing base.
“Australia has the skills, the capacity and the ability to do this, so I think if there’s more belief within our own culture that Australia can go back to a ‘can do’ mentality a lot more can be done.”