Australia's manufacturing industry has recorded another month of decline, with a leading economic analysis laying bear the problems seen across the sector in 2024.
The Judo Bank Flash Australia Composite Purchasing Manufacturing Index, which tracks the wider economy, has identified manufacturing as a drag on the speed of growth in Australia in the middle of 2024 despite easing off of pressures around inflation and the jobs market.
The main index fell from 52.5 in August to 50.6 in September, just above the neutral mark of 50, but the Manufacturing-only index was down at 46.7, itself a fall from 48.5 a month ago.
It was the eighth consecutive month that the manufacturing sector has contracted in Australia, and the drop from August to September was the quickest such fall since May 2020.
The study reported a fall in new orders, which begat further pullbacks in purchases and head count.
Warren Hogan, Chief Economic Advisor at Judo Bank, told Industry Update that the prognosis was not good.
The Index continues to paint a picture of a manufacturing industry in Australia that is struggling to grow, he said.
While not recessed, it's certainly been stagnating for a solid 18 months. If you were setting monetary policy for manufacturing, you'd be cutting rates rapidly.
It is such a small part of the Australian economy that it's not macroeconomically relevant, but nonetheless, it is meant to be at a turning point.
There are good reasons why we think we should be starting to see it turn around, not least the government's focus on it and what the pandemic taught us about supply chain resilience and the general trend towards near-shoring and friend-shoring around the world.
We're seeing a story about a sector that is struggling under the weight of cost, regulation and, for those industries that plug into the domestic economy, unable to grow because the domestic economy can't grow as we are operating at our capacity.
This idea that Australian businesses are looking to Australian manufacturers is not right. Businesses are doing what they've always done, which is seeking the cheapest alternative.
The performance of Australian manufacturing in the last 18 months suggests that, whether it was the previous government's pre-Covid critical industry policy or the now Future Made in Australia (policy), I don't think our government is anywhere close to setting up a proper policy structure to get serious about a manufacturing revival in this country.
Nothing will happen ahead of an election and I'm not confident that the powers that be in Canberra a) understand the issues and b) are serious about how to address it.
You can't do it in the confines of a room in Canberra. You can't do it through Cabinet.
We have to be serious about a government-led industry policy that provides support: greenfield and brownfield support, infrastructure, subsidies for certain inputs like labour and skills, special arrangements around skills - whatever it is, it needs to be a policy that is a joint venture between experienced private sector players and government.
Even though the data was depressing, Hogan said that he had not lost hope in manufacturing in Australia.
Despite these results that we've been seeing, I'm still optimistic that we're going to see an improvement both in terms of profitability and in terms of investment and output, he said.
It won't be spectacular, it'll be a grind, but I think there is a stronger market environment next year, particularly if we can get inflation and cost pressures down.
https://www.industryupdate.com.au/article/leading-economist-%E2%80%98still-optimistic%E2%80%99-about-manufacturing-despite-weak-growth-numbers
