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WEAK AUSSIE DOLLAR DRAWS MANUFACTURERS BACK TO AUSTRALIA

29-01-2016
by 
in 

The low Australian dollar is revitalising manufacturing in Australia, new figures show.

Locally made goods are becoming more competitive with overseas rivals, resulting in a big increase in exports.

The Australian Industry Group, the peak body for manufacturing in Australia, says some companies that had sent operations offshore as the Australian dollar soared above parity with the US dollar are considering returning manufacturing to Australia.

Australian Bureau of Statistics figures show that in the three months to November advanced manufacturing exports were up 9.3 per cent on the same period in 2014, although it still ­remains below its peak in 2007 ­before the global financial crisis.

After trading above parity with the US dollar for much of 2012, the Australian dollar began falling in the second quarter of 2013. Last year, it fell from about US80c and is now trading below US70c.

AiGroup’s head of policy, Peter Burn, said the lower dollar was having a big impact on Australian firms’ competitiveness against ­imports and it was helping companies make inroads in export markets.

NAB’s December business survey shows the number of manufacturing firms intending to hire more workers exceeds the number planning to shed staff by nine points and that price growth for finished products is the strongest in the manufacturing sector at 0.7 per cent.

AiGroup’s Performance of Manufacturing Index has been growing for the past six months.

The index is seen as a leading indicator because it is ­released ­before official statistics.

ABS statistics show that, in the six months to November, exports of motor cars (18.9 per cent), aircraft equipment (13.2 per cent), telecommunications equipment (31.2 per cent), miscellaneous manu­factured products (26.4 per cent) and machine parts (27.5 per cent) and pharmaceuticals (37.3 per cent) grew compared with the same period the previous year.

However, some big export earners, such as aluminium, fell. Mr Burn said manufacturing was still facing headwinds. Relative unit labour costs had risen relative to the rest of the world. The other issue facing manufacturing was the rise of China and its low-cost manufacturing exports.

The dollar was helping reduce the impact of these negatives, but the full impact of the lower dollar would take time to flow through the system. Mr Burn said that, to the extent businesses had been offshoring supply chains, “those imports are now more expensive and some are now reconsidering that strategy … the low dollar is revitalising domestic supply chains, and companies are becoming more confident in the export ­markets.’’

Exports of “consumable’’ manu­factured goods such as food, beverages, toiletries, cosmetics, healthcare supplements such as vitamins and pharmaceuticals have risen strongly, as have some specialist building materials.

More traditional exports for heavy manufactured goods such as mining equipment, specialist machinery and metals are facing a tougher environment.

In Brisbane, Kim Kake, Danielle Larkin and her father Allan Larkin have just begun manufacturing in the suburb of Geebung as they prepare to launch a Yoga clothing company Yogiic later this year.

Mr Kake told The Australian newspaper they had decided to set up a manufacturing operation in a warehouse in the Queensland capital after becoming frustrated with manufacturing overseas. They have employed five seamstresses and invested in state-of-the-art laser cutting technology. “We were very frustrated with the process of manufacturing offshore,” Mr Kake said. “Quality control, conditions of workers, the lack of transparency in business dealings, and time delays were constant issues. Then we started noticing the increase in Australian dollar-landed costs when the dollar started falling.” He said the higher cost of wages was another burden, but the technology in the new plant along with greenfield production systems and the lower dollar made them confident they could be competitive.

In Victoria, health food snack manufacturer Harvest Box has seen its sales explode in Asia as the dollar has fallen and has lifted its workforce from five to eight.

Sales director James Scott said the company’s snacks such as dried fruit and nuts and health bombs had started growing strongly in Asia in the past nine months. After travelling to government-sponsored trade shows in Asia, including Japan, Mr Scott said inquiries increased greatly once the dollar began falling.

Roband Australia, which manufacturers commercial food service equipment from a factory in Cromer on Sydney’s northern beaches, has also added staff.

Managing director Stephen Jackson said the lower dollar had increased the company’s export competitiveness. “We have some components that we pay for in US dollars so some components go up in cost,” he said. “But most of our competitors are fully imported and so our competitors are seeing an immediate effect on pricing.’’

 

Source: The Australian

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