National productivity the fuel for thriving manufacturing sector

29th Jun 2018

National productivity the fuel for thriving manufacturing sector

As activity in Gregsons’ manufacturing auctions continues to surge we take a look at the sustained rise in Australia’s manufacturing sector as a whole. Statistics suggest this boom shows no signs of slowing down, whilst great strides have been made by local and state government to ensure that production in the sector remains domestic.

Accounting for over a tenth of the country’s employment and over one fifth of exports, the manufacturing sector plays a vital role in the Australian economy. Last year, Business Insider Australia reported a huge jump in the Manufacturing Purchasing Managers Index (PMI), a chart used to indicate growth in the industry.

The PMI revealed that activity levels – calculated from new orders, deliveries, employment, production, exports, sales and stocks – had improved 11 months in a row since December 2016. Although this growth began to subside at the tail end of 2017, big decisions have been made by key influencers in Australia’s economy to ensure the upward trend continues.

 

Federal funds for shipbuilding

 

The Australian federal government’s recent investment in the country’s $90 billion shipbuilding programme was hailed as a ‘nation-building project’ by John Pollaers, the chairman of the Australian Industry and Skills Committee (AISC).

AISC work closely with the government and Australian industries to drive reform in the national training system and ensure the country and its domestic production programmes can rely on a highly skilled domestic workforce.

The $1.3 billion injection from the government into domestic shipyards, a project that will also see an overhaul of the country’s naval fleet, is set to create 15,000 jobs. The move should help challenge the declining number of jobs in the shipbuilding workforce and is set to create more than 10,000 indirect jobs by 2020.

 

WA invest in domestic transport manufacturing

 

Perth in particular looks set to support the surge, with WA Premier Mark McGowan recently announcing the $1.6 billion investment in locally built railcars.

With production slated in for 2021, Mr McGowan’s decision to produce domestically was admittedly informed by the poor results of other states such as Queensland and New South Wales, who moved their train manufacturing overseas.

Delays in Queensland’s fleet are well documented. Manufacturing was outsourced to India where rollout was expected in late 2016, only for on-track testing to expose a host of issues with braking, air-conditioning and ventilation. The news was a huge blow for the Queensland government, but also for Canadian based transport company Bombardier, who had undertaken the work on behalf of the state.

 

PMI Growth Continues

 

Last month marked the longest run of expanding or stable conditions for the Australian PMI since 2005, with 20 months of continuous growth. As the strength of the Australian dollar begins to wain it remains to be seen whether the manufacturing sector can continue to grow at such pace. But if investment in production continues to remain domestic, particularly in commercial building and civil engineering, this can only help keep the ship on a steady course to prosperity.