The recent announcement by car components manufacturer Autoliv to cease a significant amount of local production highlights the intense pressures on the manufacturing industry in Australia, says Ai Group chief executive Heather Ridout.
"While the company will continue to service local customers, it is a very sad occasion for its employees affected by redundancies and for those who have been connected with this company over many years, she says.
"The company is a global enterprise with a proud history of manufacturing in Australia. Over the years it has been recognised for its pioneering work in rights for women in the workplace and its groundbreaking approach to policies to encourage a balance between work and family. It has also been a leader in innovation and environmental management.
"The decision to move production offshore is one that many Australian companies are facing in a sector under relentless pressure from competition from low cost countries and the persistently high Australian dollar. An undervalued Chinese currency exacerbates these problems and makes exporting and competing against imports in the domestic market more difficult.
"These companies are also seeing pressures on interest rates and in labour markets as skill shortages intensify with the re-emergence of the resources boom.”
Mrs Ridout says policies should be implemented to ensure Australia maintains a diversified and balanced economic structure into the future.
"The coming Federal Budget is an opportunity to invest in policies that develop business capabilities, Mrs Ridout says.
“In particular, Australia needs well-designed innovation and R&D incentives and programs to develop experience in export markets. Certainly, budget cuts in these areas would be highly counterproductive.
"Ai Group also supports consideration of fresh policy ideas such as establishing a sovereign wealth fund denominated in foreign currencies and deployed to counter the more extreme movements of our exchange rate.
“This could provide exporting and import-competing businesses with an extra measure of comfort and could facilitate greater investment in these more vulnerable sectors including manufacturing.
"Sectors such as manufacturing also stand to benefit from general reform areas in taxation, education and skills development, reducing regulatory burdens and improving transport, energy, water and broadband infrastructure."