High Inflation Contributes to 12,000 Job Losses in Australia’s Manufacturing Industry: Ai Group 

A leading industry body has reported that Australia’s manufacturing sector shed approximately 12,000 jobs, representing 1.3 percent of the total workforce, in the year leading up to June 2024.

During a recent parliamentary inquiry on the cost of living, Jeffrey Wilson, a research director at the Australian Industry Group (Ai Group), highlighted the difficulties Australian businesses are facing due to inflation.

Wilson pointed out that despite a significant decrease in employment, the growth in the manufacturing sector was minimal.

“Output manufacturing only grew by a modest 0.2 percent in real terms last fiscal year, with food being the sole major branch to exhibit substantial growth,” he stated.

“This underscores the significant impact inflation is having on the well-being of Australian manufacturing.”

Referring to data from the Australian Bureau of Statistics (ABS), Wilson mentioned that the prices of inputs used by Australian manufacturers surged by an average of 20 percent over the last three years.

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The most significant increases were observed in ferrous metal products and steel (up 35 percent), electrical equipment (up 40 percent), non-ferrous metals (up 49 percent), basic chemicals (up 51 percent), and natural gas (up 58 percent).

In addition to the surge in material costs, the Ai Group director highlighted the mounting pressure on the manufacturing industry, with average wage rates climbing by 11.5 percent in the past three years.

“This represents the highest increase of any industry in Australia during the same period,” he remarked.

“The substantial increases in minimum wages in 2022 and 2023 by the Fair Work Commission contributed to this, as did recent legislative modifications to the industrial relations system that introduced rigidities, making it more challenging for manufacturing employers.”

Amid challenging economic circumstances, Wilson noted that the operating margins of Australian manufacturing decreased from 8.8 to 7.9 percent, with nine out of the 13 sub-industries reporting declines.

“These challenges in doing business only exacerbate our cost-of-living issues, given the pivotal role manufacturing plays in our industrial ecosystem and in producing the goods essential for Australian households,” he emphasized.

“There is an urgent need to tackle the supply constraints across our economy that underlie our inflationary problems.”

Food and Grocery Producers Face Challenges: Industry Leader

Tanya Barden, CEO of the Australian Food and Grocery Council, also discussed the precarious position of her industry.

Barden revealed that while her industry experienced an increase in turnover, profitability saw a decline.

“ABS data for the 2022-23 fiscal year indicates a turnover growth of 11 percent, but a profit decrease of 7 percent,” she stated.

“This worrying trend is influenced by various factors that impact our operations and ultimately affect the cost of goods for consumers, as well as the ability to hire in Australia.

“Costs related to labor, transportation, energy, commodities, packaging, and warehousing continue to rise, and the strain on household budgets is making it increasingly challenging for businesses to recoup costs and justify further investments in Australia.”

To address these challenges, the CEO proposed that the government swiftly implement targeted capital investment incentives to assist the industry in enhancing competitiveness and productivity while meeting net zero requirements.

Barden mentioned that it was difficult for food and grocery businesses to justify investments in transitioning the energy sources of their equipment—such as from gas to electricity—when they did not yield returns.

“These investments can amount to tens or hundreds of millions of dollars for individual businesses, making them hard to justify,” she explained.

“Having tax incentives will help stimulate and expedite these investments in Australia.”