Trends in Australian manufacturing
Trends in Australian manufacturing
Commission research paper
This paper was released on 28 August 2003. The paper examines key developments and trends in manufacturing in Australia, with the emphasis being on developments over the last two decades. The report emphasises the following dimensions of change in Australian manufacturing:
- the nature and determinants of relative and absolute growth in manufacturing - at the aggregate level, for its constituent parts and by region;
- the impacts of globalisation and trade liberalisation on patterns of trade, domestic manufacturing activity and the Australian manufacturing labour market; and
- the extent of productivity change in manufacturing and its sources and implications.
In examining these issues, the report analyses trends in the economic performance of manufacturing - its output, employment, capital, wages, productivity, input-output linkages and foreign trade flows - and assesses the links between these measures.
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Trends in Australian Manufacturing (ZIP 1.1 MB)Manufacturing output has quadrupled since the mid-1950s. The fastest growing activities have been those with links to Australia's natural endowments and products that are more differentiated, with higher skill levels and R&D intensities.
Manufacturing growth, while strong, has not matched that of the services sector.
- Manufacturing accounted for one in four dollars of national output in the 1960s, but only one in eight by the turn of the century.
- The relative decline in manufacturing is a common feature of richer countries.
In contrast to the output story, manufacturing employment has declined somewhat both in relative and absolute terms over the long term, although stabilising since the early 1990s.
The relative decline in manufacturing has several causes and implications:
- on the output side, the relative decline mainly reflects Australians' preference for more services as incomes rise. Import competition from lower-wage developing economies has only been a small contributor;
- on the employment side, the decline is testimony to strong labour productivity growth, including from (high tech) capital investment;
- some service activities once categorised as part of manufacturing have been outsourced, though this effect is relatively modest;
- the impacts of structural change on unemployment have generally been moderate, though the effects have been bigger for some less competitive industries and regions; and
- regional dependence on manufacturing has fallen.
While productivity growth rates have been high compared with other sectors over the long term, manufacturing missed out on the (multifactor) productivity surge apparent for the market sector as a whole in the mid-1990s. However, productivity growth has been more vigorous in the last two years.
Manufacturing is increasingly globally oriented:
- exports increased from just over 15 per cent of manufacturing output in 1989-90 to around 24 per cent in 1999-2000, with import shares also rising.
Continuing rises in 'intra-industry trade' — exports and imports of similar products — suggest that Australian manufacturing can develop capabilities within most areas, even those where competitiveness has generally declined.
