This document discusses trends in Australian manufacturing from 1984 to 2014. It notes that manufacturing's share of total production peaked at around 13-14% in the mid-1980s and has declined since due to increased competition from China, a higher Australian dollar, rising energy costs, and higher labor costs. Specifically, it shows graphs of these trends and notes that manufacturing value added and employment both declined 3-9% from 2004-2014 and even more sharply after the global financial crisis.

1. Manufacturing: Making the Future
Future for Manufacturing and Engineering Summit
Newcastle
29 July 2014
Innes Willox

2. Manufacturing Production & Share of Total Production
Mar 1984 to Mar 2014
ABS National Accounts
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
28,000
30,000
Mar-1984
Jan-1985
Nov-1985
Sep-1986
Jul-1987
May-1988
Mar-1989
Jan-1990
Nov-1990
Sep-1991
Jul-1992
May-1993
Mar-1994
Jan-1995
Nov-1995
Sep-1996
Jul-1997
May-1998
Mar-1999
Jan-2000
Nov-2000
Sep-2001
Jul-2002
May-2003
Mar-2004
Jan-2005
Nov-2005
Sep-2006
Jul-2007
May-2008
Mar-2009
Jan-2010
Nov-2010
Sep-2011
Jul-2012
May-2013
Mar-2014

3. Manufacturing competiveness hit
from four sides since the early 2000s
• China
• Currency
• Energy costs
• High growth of unit labour costs

4. China’s manufacturing output grew by > 14% pa
(and overtook Japan’s and the US’s)

5. A decade of high currency
$A:$US Trade Weighted Index
0.704
0.870
0.947
0.50
0.55
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1983-2004 2004-2014 2009-2014
+34.5%
57.6
68.4
71.9
50
55
60
65
70
75
1983-2004 2004-2014 2009-2014
+18.8%
+25.0%
+23.5%

6. Erosion of Energy Cost Advantage
Producer Price Indices for Natural Gas and Electricity Inputs of Manufacturers
20
40
60
80
100
120
140
Natural Gas Electricity

7. Manufacturing Unit Labour Costs
(% change 2002-2012)
The Conference Board International Labor Comparisons
-40% -30% -20% -10% 0% 10% 20% 30% 40%
United States
Australia
Belgium
Canada
Czech Republic
Denmark
Finland
France
Germany
Italy
Japan
Korea, Republic of
Netherlands
Norway
Singapore
Spain
Sweden
Taiwan
United Kingdom
Average

8. Summary of 2004-14 for manufacturing
-3.1%
-8.9%
-10%
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
GVA Employment

9. Post GFC particularly difficult
Manufacturing Value Added (% change) Average manu employment (% change)
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
GVA (year to March)
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Employment (year to May)

10. Manufacturing: Making the Future
Future for Manufacturing and Engineering Summit
Newcastle
29 July 2014
Innes Willox