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Aussies see decline in local manufacturing

Australians in general are pessimistic about the future of manufacturing in Australia, and see it as a declining industry.

In a report commissioned by the Industry Department, 64% of respondents expect manufacturing to decline in future, with a similar amount suggesting that manufacturing jobs are unstable and unsecure. Just 37% suggested Australia can compete effectively on a global basis.

The main disadvantage for Australian manufacturing is perceived to be cost. Focus group participants held a broad consensus that Australia cannot compete. The most frequently identified cost pressure was the cost of labour, followed by cost of materials and government regulations.

Among many of the groups in the survey, the report found that there was little appetite for the ongoing support of the automotive industry. The federal government has given billions to car manufacturers Ford, General Motors Holden and Toyota to keep making cars in Australia. Many participants were concerned that the government was merely propping up inefficient businesses. The automotive industry is estimated to employ 55,000 people directly and support another 200,000 jobs indirectly, such as automotive accessories groups ARB Corporation (ASX: ARP) and Supply Network (ASX: SNL).

Steel manufacturers BlueScope Steel (ASX: BSL) and Arrium (ASX: ARI) ex-OneSteel have struggled to compete against cheap imports, huge debt levels and the high Australian dollar, and have also received handouts from the federal government. Both are heavily reliant on the local car manufacturing industry.

The manufacturing industry was rated the second least attractive sector to work in, out of eight major employing industries. Just 29% of respondents would recommend manufacturing as a career for young people.

Despite the pessimistic view of the manufacturing industry, 90% said that manufacturing was important to Australia’s economic prosperity. But the manufacturing sector’s importance to Australia appears to be misunderstood. Respondents estimated that manufacturing made up around 29% of the economy. According to the Australian Bureau of Statistics (ABS), the actual size of manufacturing as a percentage of GDP was just 8% in 2011/12.

Foolish takeaway

The survey also found that the younger generation readily embraces products from overseas, suggesting conditions may get much worse for our manufacturing industry.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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