Local manufacturing up despite tough conditions

The Australian Food and Grocery Council’s (AFGC) latest annual industry snapshot shows the nation’s food and grocery manufacturing sector experienced 4.5 per cent real growth in 2017-18 despite challenging domestic and international conditions.

The industry remains a key economic contributor and employer, according to the State of the Industry Report, injecting $122.1 billion into the economy. It also remains one of Australia’s largest employers, providing jobs for 273,301 people representing 32 per cent of manufacturing jobs. The sector’s contribution to regional and rural communities is of particular note, where sector employment is 107,000.

Resilience in the face of uncertainty

AFGC Deputy CEO Geoffrey Annison says the report illustrated the key role the sector played in the Australian economy and highlighted why steps must be taken by all levels of government to ensure it remains strong into the future.

“This report shows the resilience of the sector in the face of global economic uncertainty, drought, rising production costs and seven consecutive years of retailer price deflation,” Dr Annison said.

“Though there has been growth it has been slow and the industry remains under significant pressure. Companies have continued to make efficiency improvements to stay competitive but this is not sustainable in the long term.”

Low capital investment

The sector experienced minimal growth in capital investment, at $2.9 billion (+0.31 per cent).

Dr Annison says businesses have been hesitant to invest because of difficult trading conditions.

“This is problematic, as investment in site modernisation and innovation is essential if businesses are to keep their operations in Australia,” he said.

“The future of Australia’s food and grocery manufacturing sector is reliant on business confidence. The AFGC believes governments must work with industry, with a focus on cutting red tape and the introduction of targeted investment allowances.

“Policies addressing cost competitiveness and fair retail trading conditions are also essential and would help ensure the sector remains viable, retaining business and jobs into the future.”

Exports buoy growth

Despite tough domestic conditions, Australian food and grocery exports increased by 7.6 per cent to $34.4 billion over 2017-18. This was led by a 45.3 per cent increase in Chinese exports off the back of the China-Australia Free Trade Agreement and the opportunities it has unlocked.

“The sector’s global footprint continues to expand, with Free Trade Agreement developments opening up more and more export opportunities for Australian food and grocery manufacturing businesses,” Dr Annison said.

“However, policy settings must be right for continued growth to continue.”

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