The decline of the Australian manufacturing industry has made headlines for a number of years. With major factory shutdowns of iconic businesses such as Holden, a notable loss of jobs in the manufacturing industry, and a shift towards overseas manufacturing, it would be easy to think that the total collapse of the Australian manufacturing industry is nigh.

Australia’s high labour costs, small domestic market, risk-averse culture, geographical remoteness and shortage of leaders are just some of the factors thought to be hindering the development of a strong manufacturing sector.

Encouragingly, recent figures tell a more optimistic story. The Ai Group’s Performance of Manufacturing Index (PMI) rose to 54.0 in February, up 1.5 points since January. 85,000 manufacturing jobs were created in 2018, one of the biggest increases in any sector according to the Australian Bureau of Statistics.

A new model of manufacturing success has emerged in recent years, allowing Australia to excel within a niche. With emerging economies in developing regions adding to the size of the global consumer pool, Australia has the opportunity to excel in niche manufacturing areas that appeal to the Asian middle class. Smart products on the Internet of Things or highly specialised medical products are some areas in which Australian manufacturing can potentially reign supreme, rather than trying to keep up with mass-produced products being churned out elsewhere in the world.

An increased focus on skills, energy efficiency, waste management, building standards, employee safety and innovation is needed for Australian companies to see continued growth in 2019. Regardless of business priorities or the political landscape, these areas of focus should be noted by all.

Future-forward skills

As we have covered before, Australian industry is affected by a concerning lack of skills that are necessary in Industry 4.0, particularly in the area of STEM.

Increased engagement with schools, vocational institutions and universities is encouraged to develop work-ready individuals. This allows businesses to benefit from the latest skills in areas such as data analysis, science and more, with higher apprenticeships and work-integrated learning being particularly effective models for facilitating and developing the skills your business most requires. Such programs allow for innovative thinking and new practices to be introduced to your workforce, as well as providing you with a talent pool that you can later hire from.

While automation will mean the end of some roles within the industrial landscape, it offers even more opportunities to develop new skills and areas of expertise. According to research conducted by UTS professor Roy Green, “50 percent of components suppliers will be out of business by the end of the year, (but) 10-15 percent will have successfully diversified into defence electronics, aerospace, medical technologies, renewable energy, as well as alternative car industry supply chains.” By staying abreast of industrial changes, businesses can develop the skills and expertise needed to move into an in-demand niche.

Upskilling is also recommended for your existing staff, allowing them to develop the STEM skills needed in an increasingly digitised workforce.

Energy efficient practices

Reducing costs is a key priority of any business, and in the Australian context, energy efficiency is of particular importance. Australia is estimated to be up to 30% less energy efficient than better economies, with our high energy prices also taking a toll on companies.

With greater dependence on advanced technology and ever-increasing energy prices, it will certainly pay off to prioritise energy efficiency as this will improve your business’s bottom line.

Waste management and reduction

Industry waste streams have been affected recently by China’s decision to restrict the amount of unsorted waste it accepts from Australia and other countries. Australian businesses are now tasked with the challenge of reducing and managing their waste better to keep costs down and productivity high. Better management of the waste cycle is needed to make the most of recycled or reusable materials, and to better sort waste streams, with government programs already being in place to aid with this.  

Building standards

Australia’s construction industry has been plagued by controversies around non-conforming building products (NCBP) such as the Infinity cables recall, building cladding fires and the Opal Tower failure. Building standards are not being adequately applied or enforced, resulting in poor quality products and services cropping up in the construction industry. A greater adherence to buildings standards is needed to ensure that Australian businesses are on-par with global standards.

Employment and safety regulation

Workplace safety has been a pressing concern in Australia, with there being an increased need to regulate casuals, labour hire and gig economy workers, as well as to reduce wage theft and exploitation while enforcing safety penalties.

The manufacturing industry demands a greater focus on safety than in other industries, and companies must revisit their safety systems and employment arrangements to promote employee wellbeing and company-wide productivity.


Australian manufacturing must lead the way with innovation using the right mindset and policy settings. Trends must be put into effect rapidly, data must be valued just as much as physical goods, and new capabilities must be explored through collaboration among industry and research institutions. The Office of the Chief Economist found that only 16% of Australian businesses have an innovation and outward-orientated culture, representing a huge potential to improve.

The Australian public strongly supports local manufacturing, with ABS data revealing that 76% agreed or strongly agreed with the statement that success in global trade requires strong manufacturing exports. Ai Group project continued growth for the manufacturing industry if the above values are prioritised within businesses as well as both levels of government.

The Ai Group’s Higher Apprenticeships program can assist companies with their future-proofing efforts, providing the skills and talent pool needed for ongoing success.


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