5 May 2015
A new beginning for Australian manufacturing?
Manufacturing has changed the world and is itself changing, more fundamentally than at any time since the industrial revolution. Does this spell the end of manufacturing in Australia, or a new beginning?
Our immediate challenge is that the resources boom has ‘hollowed out’ the sector in a number of ways. First, the high Australian dollar, associated with rising commodity prices, has made traditional low cost manufacturing uncompetitive. This has come to be known as the “Dutch disease”, following the similar impact of North Sea gas discoveries in the 1970s.
Second, under pressure to open new mines, resources companies raided manufacturers for skilled workers instead of training their own, offering wage rates that manufacturing employers could not afford. This might not have been so damaging if the companies had sourced their equipment and infrastructure locally, but much of this was sourced from abroad.
Third, the increased terms of trade resulting from high commodity prices masked a slowdown of Australia’s productivity performance since the end of the 1990s. The complacency induced by the mining boom distracted the attention of policy-makers from other sources of growth, such as manufacturing, which would eventually be needed to “rebalance” the economy.
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