Manufacturing Crashes as the Labor Government is Paralysed

2 Sep 11

The PricewaterhouseCoopers and Australian Industry Group (AI Group) Performance of Manufacturing Index (PMI) has crashed to 43.3 in August.

August was the fifth month in six the index has been below 50, the dividing line between expansion and contraction.

This is the lowest level in more than two years as a surging currency hurts exports and the highest interest rates in the developed world curb demand at home.

In a press release the Liberal party points to Labor's impotence and incompetence on manufacturing policy and that since Labor was elected in 2007, there have been 26 monthly contractions in manufacturing activity in Australia, quoting that this is an extraordinary figure considering it has been in office for 44 months.

The PMI reports that only two of the 12 manufacturing sub-sectors, food and beverage and clothing footwear, posted increases in activity in August.

The Reserve Bank is quick to point out that the Australian economy, the only to avoid a contraction during the 2009 GFC, is undergoing a "structural adjustment" after the biggest mining boom in a century has driven the nation's currency to record highs.

July saw the first increase in unemployment since October 2010 with many much publicised "company restructures" involving redundancies including Bluescope and more recently CSR just to name a few.

AI Group chief executive Heather Ridout has stated that "continued weakness in the PMI is further evidence of the extremely challenging business environment faced by our manufacturers, and that decisive government action, and long-term forward-looking strategy for manufacturing is needed to create the most competitive environment for the sector to flourish and survive through the resources boom".

It is pertinent to point out from recent press reports that the Government is now refusing to even hold an inquiry into the manufacturing crisis and possible ways out of what seems a mess, and even faced with the current situation is refusing calls to dump its job destroying and confidence crushing carbon tax.

It is interesting to note that whilst Australian workers anxiety about employment security increases, the government continues to hide behind a veil of the need to be innovative to face the challenges ahead. Does the government need to be reminded that manufacturing is a larger contributor to GDP and a larger employing sector than the resources sector, whose boom will inevitably end, what then for Australian workers and their standard of living?