Manufacturing: Making the Future Future for Manufacturing and Engineering Summit

Newcastle29 July 2014

Innes Willox

Manufacturing Production & Share of Total ProductionMar 1984 to Mar 2014

ABS National Accounts

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

Manufacturing competiveness hit from four sides since the early 2000s

• China• Currency• Energy costs• High growth of unit labour costs

China’s manufacturing output grew by > 14% pa (and overtook Japan’s and the US’s)

A decade of high currency

$A:$US Trade Weighted Index

1983-2004 2004-2014 2009-20140.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

0.704

0.870

0.947

+34.5%

1983-2004 2004-2014 2009-201450

55

60

65

70

75

57.6

68.4

71.9

+18.8%

+25.0%

+23.5%

Erosion of Energy Cost AdvantageProducer Price Indices for Natural Gas and Electricity Inputs of Manufacturers

Mar-1990

Mar-1991

Mar-1992

Mar-1993

Mar-1994

Mar-1995

Mar-1996

Mar-1997

Mar-1998

Mar-1999

Mar-2000

Mar-2001

Mar-2002

Mar-2003

Mar-2004

Mar-2005

Mar-2006

Mar-2007

Mar-2008

Mar-2009

Mar-2010

Mar-2011

Mar-2012

Mar-2013

20

40

60

80

100

120

140

Natural Gas Electricity

Manufacturing Unit Labour Costs (% change 2002-2012)

The Conference Board International Labor Comparisons

United StatesAustraliaBelgiumCanada

Czech RepublicDenmark

FinlandFrance

GermanyItaly

JapanKorea, Republic of

NetherlandsNorway

SingaporeSpain

SwedenTaiwan

United KingdomAverage

-40% -30% -20% -10% 0% 10% 20% 30% 40%

Summary of 2004-14 for manufacturing

GVA Employment-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

-3.1%

-8.9%

Post GFC particularly difficultManufacturing Value Added (% change) Average manu employment (% change)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

GVA (year to March)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Employment (year to May)

Manufacturing: Making the Future Future for Manufacturing and Engineering Summit

Newcastle29 July 2014

Innes Willox