Manufacturing resized

Repercussions of the almost forgotten resources boom

Author: Dr Nigel Stapledon, Chief Advisor.

The repercussions of the almost forgotten resources boom – the biggest since the 1860s! – continues to reveal its impact on Australia’s industry structure.

Manufacturing felt the brunt of the squeeze from the resource sector’s expansion. The simple equation is that if one sector expands its demand on labour resources, something must give elsewhere. In the period 2006-11, manufacturing’s share of employment dipped from 10.7% to 9.2%. But the lagged impact of firm decisions is evident in the much sharper contraction from 9.2% to 6.7% between 2011-16.

Figure 1 puts this contraction in historical perspective and shows the long-term decline in manufacturing in Australia broadly following that for the US, in response to global trends upscaling production volumes and shifting to developing economies. But in the recent period, Australia’s sharp contraction contrasts with a stabilisation in manufacturing in the US – despite all the noise about NAFTA and Mexico.

Will manufacturing bounce back? Yes and No.

No, because in some respects the resource boom simply brought forward the inevitable closing of the car industry and other segments of manufacturing where Australia simply cannot compete. That is meant as no criticism of the companies or their skilled staff, and their efforts to stave off the inevitable. And past Governments throwing away more money was never a good use of taxpayers’ money.

Yes, in the sense that elements of manufacturing that are inherently more competitive will benefit from the lower $A, and start to grow again. But we are still talking about manufacturing being a permanently smaller sector of the Australian economy.

From a land use perspective, the decline in the period 2006-16 has created a substantial amount of unused industrial land in Australian cities.

That brings to attention the wisdom of the so-called precautionary approach historically adopted by Local Governments to not releasing old industrial land for alternative uses in inner urban areas. If we are waiting for industry to come back, it will be an awfully long wait (like, never). In the meantime, there will be a lot of unmet demand for housing which will only put upward pressure on prices. And it will also mean unmet demand for social housing and for the social infrastructure (schools, recreational facilities) which these inner-city communities need.

Time for a serious rethink by policy-makers on the consequences of this policy.


Get in touch:

For further information on the the manufacturing sector in Australia or to discuss your property research requirements, contact Dr Nigel Stapledon (one of Australia’s leading macro-economist and housing experts) to discuss your next research requirement, 02 9221 5211 or nigel.stapledon@macroplan.com.au.

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