Australian manufacturing: room to grow

Australia’s manufacturing industry has room to grow as the sector continues its transition from labour-intensive manufacturing such as textiles and motor vehicles to the opportunities offered by higher-technology and value-added manufacturing.

This includes the rapidly growing food and beverage industry which is now Australia’s largest manufacturing sub-sector with more than $A25 billion in gross-value added per annum and attracting the highest new capital expenditure, totalling more than $A600 million in 2014 according to the Australian Bureau of Statistics (ABS). 

As ANZ’s insight report Australian Made highlights, China represents a significant export opportunity for the sector, with manufactured product exports increasing from $A1.4 billion in 2000 to more than $A8 billion in 2015. 

" Companies must invest in home-grown talent which provides local insight about the end consumer and ways of conducting business." Alan Hood, CEO Bulla.

This is expected to grow to $A19 billion per annum by 2030 amounting to cumulative growth of $A75 billion by 2030.

This forecast is supported by Australia’s proximity to Asia with associated benefits in shipping costs and Asia's rising emerging middle class - expected to grow by more than 20 million each year in China alone. 

ABS’s labour force data also point to the industry’s resilience with manufacturing adding an extra 14,500 jobs in the year to May.

Getting it right

Bulla CEO Allan Hood says there are a number of export considerations for Australia’s food and beverage manufacturers. Firstly, he says, manufacturers must focus on getting the portfolio right.

“A two-litre tub of ice cream works well in Australia but this doesn’t guarantee success in Asia, where consumers have smaller freezer capacity,” he told a recent ANZ-hosted manufacturing industry event.

“Secondly, hiring people in your export destinations is critical. Companies must invest in home-grown talent which provides local insight about the end consumer and ways of conducting business.”

“Thirdly, companies must make bold decisions to secure the right partners in a target market and the brand must be important to them."

A renewed sense of optimism was evident during the event, with attendees, including 25 of the country’s leading manufacturers, buoyed by export opportunities driven by the Chinese economy’s shift to services and its population’s increasing demand for high-quality products.

What also became clear throughout the discussion is the importance for Australian manufacturers to look outwards.

Visy director of corporate development Lynda Cheng said there were many lessons to be learnt from Australia’s international competition - including the United States, New Zealand and Singapore, particularly - with regards to productivity.

One example is Singapore’s obsession with attracting investment and staying competitive, including their willingness to constantly offer incentives, streamline regulations and reduce tax rates, she said.

Edward Staughton, managing director of Albury-based pet food manufacturer Cool Off, cited the need for Australian manufacturers to be less domestically focused and pursue export opportunities.

The regional manufacturer has been successful in pursuing growth in the United States by leveraging its Australian intellectual property and technology which is considered world’s best practice.

The family business is progressively corporatising by upgrading systems, staffing and processes whilst trying to retain its speed to market and flexibility.

Testing times

Australian manufacturing has a proud history which has been tested in recent times and there’s little doubt it continues to face challenges in pursuing international expansion. These include skills shortages and high input costs such as energy.

In the future the sector’s role in the economy will be supported by a growing and global appetite for many of our country’s natural endowments such as food and minerals.

To prosper, the industry must remain focused on export opportunities, high-quality products and international competitiveness.

Phil Crouch is State Head Victoria and Tasmania, Regional Business Banking at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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