28 Sep 2021 | Media Release
Australian manufacturing is fraught with supply chain disruptions and labour shortages on a scale not seen in decades. Despite this, the sector remains resilient but is relying on achieving high vaccination targets to end lockdowns and allow the economy to reopen, the latest industry survey has found.
Released today, the September quarter results from the Australian Chamber-Westpac Survey of Industrial Trends shows that Australian manufacturers are expecting conditions to bounce back when the economy reopens. However, skill and material shortages are likely to constrain the sector’s potential growth.
“The latest quarterly Industrial Trends Survey found that despite lockdowns in NSW, Victoria, and the ACT causing Australia’s manufacturing output to stall, expectations for future growth remain positive,” ACCI chief executive Andrew McKellar said.
“However, global supply chain disruptions mean employers are finding it increasingly difficult to source key components of production – these material constraints are at levels not seen since the oil shock of the 1970s. This is leading to cost pressures, with input costs increasing at a much faster rate than prices, putting pressure on manufacturers profits.
“Skills shortages are also identified as a major impediment to the growth in Australia’s manufacturing output. With labour constraints recorded at their highest in 21 years, employers are having increasing difficulty finding experienced workers as a result of domestic and international border closures.
“Manufacturers will continue to operate below full capacity, despite a growth in new orders, with material and labour constraints limiting their production. Business desperately needs a solution to these shortages.
“The survey indicates manufacturers are confident that high vaccination rates are the ticket out of the current lockdowns, a positive sign for growth in manufacturing and the economic recovery. As such, it is essential that momentum is maintained to reach the 80 per cent vaccination target as soon as possible.
“The longer it takes to achieve the 80 per cent vaccination target across the country, the longer it will be before manufacturing can return to operating a full capacity. Slow vaccination rates put the manufacturing sector and our economic recovery at risk.
“More encouragingly, investment intentions remain solidly positive, suggesting manufacturers remain confident in the future growth of their business. Growing business investment is fundamental to boosting productivity and sustaining strong economic growth as we emerge from the COVID crisis.
Westpac Senior Economist Andrew Hanlan said the manufacturing sector was substantially impacted as the Delta outbreak sent NSW and Victoria back into lockdown.
“Activity conditions virtually stalled in the September quarter, with the Westpac–AusChamber Actual Composite moderating from 63.1 in June to 51.2 in the September quarter, only a touch above the 50 break-even mark. Respondents reported output was flat, so too employment with the impact of the NSW and Victorian disruptions offset by gains elsewhere.
“The positive is that in comparison to the experience in mid-2020 the Survey reveals a degree of resilience in the face of the Delta outbreak. Output stalled, rather than contracting, and new orders expanded, rather than collapsing as occurred in 2020.
“Respondents reported a lift in new orders, at a net +12 per cent, although that still represented a moderation from a net +35 per cent in the June quarter. By comparison, during the initial nationwide lockdown of 2020, orders collapsed, declining by a net -53 per cent in the June quarter.
“This resilience reflects the considerable momentum in the economy ahead of the latest lockdowns, with an upswing in home building, strong consumer spending and the ongoing uptrend in government spending, all providing a boost to the manufacturing sector. By contrast, conditions were already sluggish ahead of the initial lockdown in 2020.
“Manufacturers are relatively positive about the outlook, the survey finds. There is a confidence that high vaccination rates will see NSW and Victoria reopen in the coming months, leading to a rebound in activity. The Expected Composite index is well above the 50 level, at 57.5, down only modestly from 60.6. A net 21 per cent of respondents anticipate a rise in new orders in the December quarter.
“Within this broader picture of resilience and confidence, the survey also points to some areas of concerns.
“Cost pressures have escalated during the pandemic to be at elevated levels, with a net 37 per cent reporting a lift in costs. This, and the hit from the lockdowns, is hurting profitability, with a net 1 per cent expecting profits to decline over the year ahead.
“Manufacturers’ ability to produce is being constrained by a number of aspects associated with the pandemic. Global supply bottlenecks have material constraints at the highest level since the oil shock of the mid-1970s, the survey finds. Border closures have contributed to labour constraints, which for the past three quarters were on average the highest since 2000, and before that, 1989.
28/04/2023
A national Agrifood Workforce Summit held in Brisbane has heard that without urgent attention, workforce issues in the supply chain would continue to put upward...
20/04/2023
Major changes mooted for the Reserve Bank following its first external review in 40 years will be a success if they strengthen the bank’s capability,...
6/04/2023
The Australian Chamber of Commerce and Industry, the nation’s largest business network, congratulates Justice Adam Hatcher SC on being officially welcomed as the new president...
4/04/2023
Embattled small businesses will be granted some respite today after the Reserve Bank’s decision to halt its rapid run of interest rate increases. “Small business...
31/03/2023
The nation’s largest business organisation, the Australian Chamber of Commerce and Industry, and its 400,000-strong member network, has backed a 4 per cent wage increase,...
29/03/2023
With further signs that inflationary pressures are receding, the nation’s largest business network has renewed its call for the Reserve Bank to pause any further...
27/03/2023
The nation’s largest business network, the Australian Chamber of Commerce and Industry, has called on the government to assure the business community that energy affordability...
17/03/2023
Australia will enter a twilight era of economic lethargy and lower standards of living if the Productivity Commission’s stark warnings go unheeded. “This report should...
7/03/2023
The Reserve Bank should pause any further increases to the cash rate at its April meeting following a 25-basis point rise announced today. “With too...
23/02/2023
The Australian Chamber of Commerce and Industry has welcomed the launch of the new 10-year Australian Work Health and Safety Strategy 2023-2033, released today. “The...
22/02/2023
Businesses are delivering the strongest rate of wages growth in more than decade, with the private sector wages bill rising by 3.6 per cent in...
22/02/2023
An extension of post-study work rights and an easing of pre-pandemic student visa work hours restrictions announced by the federal government yesterday will help address...
15/02/2023
The Australian government must categorically reject Greens proposals to block new gas and coal projects as the price of passing emissions safeguards legislation. The Greens...
7/02/2023
The ninth increase to interest rates since May last year raises concern about the impact on small business and the wider economy. “We have already...
31/01/2023
Safeguard Mechanism crediting legislation before the parliament must be passed to provide energy certainty to Australian businesses. “For the sake of certainty and the achievement...
30/01/2023
Government must show expenditure restraint and commit to concrete structural fiscal repair, the nation’s largest business network has outlined today following the release of its...
25/01/2023
Figures released today show inflation at 7.8 per cent in the December quarter, renewing pressure on the Reserve Bank to continue raising interest rates when...
13/01/2023
The Australian Chamber of Commerce and Industry has welcomed the release of the Productivity Commission’s report Lifting Productivity at Australia’s container ports: between water, wharf and...
10/01/2023
The Australian Chamber of Commerce and Industry welcomes proposed changes to the safeguard mechanism to drive down carbon emissions while providing business with much-needed certainty. “The safeguard mechanism will...
10/01/2023
Expanding the skilled migration intake, offering temporary migrants a pathway to permanent residency and halving the levy employers pay to recruit foreign workers will be...