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Major report released on the future of manufacturing

31 May, 2006

The Australian Industry Group (Ai Group) has released the most extensive study conducted into the future of the manufacturing sector in Australia in almost a decade.

A clear message from the report is that manufacturers are rethinking and, in most cases, renewing their businesses in the face of global challenges and opportunities. For many manufacturers, this will mean that they need to globalise their operations and forge new growth opportunities to ensure their future survival. Strategic government action to remove obstacles and to encourage innovation and improvements in competitiveness is essential and will complement businesses own efforts in this regard.

The Ai Group report, Manufacturing Futures: Achieving Global Fitness, has two principle characteristics.  Firstly, it is our best take on the state of the industry.  It presents the views of a wide cross section of companies on the future prospects of Australian manufacturing; the strategies they are implementing to remain competitive; and the role government should play in shaping their future.  Secondly, the report sets out our analysis of how the industry can be successful in the future and proposes government action on 29 fronts to support the further development of world class Australian industries.

Ai Group Chief Executive, Heather Ridout, launched the report in an address to the National Press Club in Canberra.  She says the report highlights the fact that manufacturing in Australia is at a critical turning point in its development and she called for a renewal of the Federal Government's manufacturing strategy.

"Manufacturing Futures is released at a time when pressures on the manufacturing sector have combined to radically change the dynamics of doing business in Australia and globally.  These difficult business conditions for manufacturers include the rising tide of reactive protectionism in key overseas markets; the intensification of import competition and the emergence of China; the loss of world market share for Australian manufactures; global sourcing and outsourcing; tight margins; high regulatory costs; and a dollar that has been high for a sustained period," Ridout said.

"Industry has strong ownership of this report, which is based on hundreds of interviews, workshops and a major survey of over 800 companies.  A message from many of the companies interviewed for the study was that whether or not they sell on the domestic market or offshore, they must globalise to survive.

"The report shows that large sections of industry are responding and not bowing to the pressures.  Many are using strategies such as: fashioning new global business models with a focus on product design and innovation that will deliver quality products at world competitive prices; investing in skills; using global supply chains to source manufacturing inputs; investing in new ventures around the world; or locating a greater proportion of operations offshore,"  Ridout said.

"At the same time, while acknowledging that the role of government is not as straightforward as it used to be, the report identifies a strong role for government policies that will better equip the whole economy to adapt swiftly and effectively to shifts in economic circumstances.

"The policy recommendations contained in this report are aimed at encouraging manufacturing to become more globally engaged and to reinforce the ability of the sector, and particularly SMEs, to build the capabilities and move to the higher performance levels needed to underwrite its future growth.

"In the end, if Australia wants a viable manufacturing sector - a sector that currently employs more than a million Australians and contributes around 13 per cent of our GDP - policies such as these need to be implemented.

"At the heart of Ai Group's recommendations is a whole-of-government approach which will underpin a renewed strategy for the manufacturing sector to ensure that it becomes more global and contributes to the overall growth of the economy. The adoption of the recommendations in Manufacturing Futures will also improve the ability of manufacturers to play their part in the efficient rebalancing of the domestic economy when current boom conditions, evident in the minerals and construction sectors, inevitably recede.

"Companies make their own decisions about their futures.  If the positive policies such as those put forward in Manufacturing Futures are implemented effectively, there will be a much greater chance that these company decisions will be aligned with the interests of Australia and with favorable benefits in terms of growth and jobs," Ridout said.

Click" target="_blank">here to download a copy of the full summary.

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