Australia Still Ranks Highly on Manufacturing Costs Against Other Countries

8 May 08

Just how does Australia compare against other developed, industrialized nations in terms of cost competitiveness for the manufacturing sector and other factors? A recently released survey answers exactly that question and Australia hasn't stacked up too bad.

KPMG LLP recently released the results of its 2008 Competitive Alternatives study—an independent analysis of major cost factors affecting business site selection. The 6-month research program for the study, the 7th in a series dating back to 1994, covered more than 100 cities in Australia, Canada, France, Germany, Italy, Japan, Mexico, Netherlands, the United Kingdom, and the United States. This edition measured 27 significant cost components, including labour, taxes, real estate, and utilities.

Even more interesting, these cost components are cross-referenced with 17 different vertical industries over a 10-year planning horizon. Eleven of those industries are in manufacturing, and most qualify as advanced manufacturers.

This year marked the first time the study compared an emerging industrialized country: Mexico, with the control group of mature industrialized countries. Mexico clearly separated itself from the competition with a 20 percent overall cost advantage. Everyone is curious to know how AUstralia fared, and the answer is favorably. Despite a 17.9 percent appreciation of the Australian dollar relative to the US currency, Australia has been able to maintain a slim 4th place ranking in the survey.

Bearing in mind that Mexico ranked number one for costs in all manufacturing industries, Australia also made a strong showing here. We always ranked in the top half, and most often in the number two or number three position. Our closest competitors are usually Canada or the United States.

Other highlights of the Competitive Alternatives Survey:

• The most notable cost trends have been caused by the weakening of the US dollar against other currencies. This has resulted in the US making the greatest gain in cost competitiveness due to their declining dollar.
• Australia has lost cost competitiveness relative to the US, but has gained ground in Europe.
• Australia achieved its best ranking for costs for its manufacturing sector coming in at number 2, but was still significantly behind first placed Mexico.
• Australia also ranked highly for costs in the software development sector. Labour costs are the dominant factor for this industry sector.
• Australia was behind Mexico, Canada, US and france for costs to conduct R&D. The significant factors affecting R&D costs were the costs for research staff and the R&D tax concessions.
• Australia was well behind Mexico and the US for costs of corporate services, mostly due to high labour costs for entry level staff.
• Surprisingly despite Australia's broad expanses and more distant location from its export destinations, Australia ranked quite well for costs of transport.
• Of the Australian cities surveyed, Adelaide achieved a number 1 ranking, Melbourne was ranked number 2, Brisbane number 3 and Sydney number 4. These rankings were within the Asia pacific Region which included 3 Japanese cities which all ranked behind the Australian cities.
• Australia ranked very highly along with the Netherlands and Germany as the countries leading innovation in terms of having the highest total of human resources involved in science and technology.
• Energy useage in Australia was high although Australia was one of only 3 countries totally supplying their own energy needs an in fact having net energy exports.

Copies of the full report are freely available fro download by visiting www.competitivealternatives.com