A Black Day for Manufacturing

5 Sep 11

With more than 1400 direct jobs lost in the steel industry in the past week alone and some 20,000 lost in this key manufacturing sector since February, BlueScope’s recent announcement represents another black day for Australian manufacturing.

As we all know, the steel industry has been the centre of debate for some time, battling reduced demand, rising costs and diminishing competitiveness with no apparent light at the end of the tunnel.

Perhaps even sadder, is the fact that Australia’s leading industry organisations warned that the resources boom was failing to sustain local manufacturing jobs and that the concerns of companies like BlueScope should have been dealt with in the May budget.

The benefits of the mining boom are simply not flowing as expected to the manufacturing sector. More equipment is being accessed overseas, and the promised growth and related opportunities that was meant to have been generated has just not happened to my knowledge, says AMT Magazine Editor Martin Oakham. "The major employing sectors of the economy, of which manufacturing is at the forefront, are as you all know experiencing stressful trading conditions with no clear future."

As Heather Ridout  states, “We have reached a crucial point which demands government action in coordination with industry to ensure the sector is given the sustained support necessary to emerge through the current structural pressures and to prosper beyond the boom."

Manufacturing as a whole is enduring a high value dollar, rising labour costs - which are not backed by supporting productivity gains and increased energy costs; which has of course pulled the ground out from below our feet with regard to Australian export potential.

On top of this, the recently introduced ‘carbon price’ of $23 a tonne is clearly set too high for an already struggling industry. Instead of promoting investment in clean technologies as is intended, it’s likely to prove detrimental in the short term.

It’s real issues like this that are leading the manufacturing community at large to question the government’s commitment to ensuring its survival. On the other hand, the level of investment in new equipment has been declining steadily over the last four years, so whilst it’s easy to blame the government, there is clearly more that can be done in terms of company investment programs – manual machine tools and individual highly-skilled engineers are not cost effective in comparison to a networked manufacturing cell and a single cell operator.

If Australia is to have the bright manufacturing future we all aspire to, it is going to have to start with clear investment programs. On average the productivity of a machine tool doubles every four years, so if you are using machines you bought in 2005 you are already uncompetitive in the global playing field on that point alone.

In addition to the structural adjustment support the government has made available, we need a strategy to deal with the stifling impacts of the minerals boom, the key elements of which should include creating incentives for innovation and training. Further, we need a reduction in the tax burden on these sectors so as to attract new investment. We also need to sponsor the development of business capabilities all along supply chains.

Editorial Comment by AMT Magazine Editor Martin Oakham in the September Edition.