The demise of manufacturing in Australia

[Marc.com]

I don't think cutting interest rates by 25 basis points is going to do sweet FA to the economy. No doubt the real reason is to take the pressure off the Aussie $$$ and try and help out manufacturers. I think the higher interest rates were the only sensible the Govt did in 2009 as it forced the economy to give some thought to deleveraging rather than consider itself flame proof.

[211kawasaki]

Yes Marc and the result of that deleveraging has been a higher AUD. What we have done in response to that now re-leverage ourselves as a country to someone else - the Chinese.
In my line of work (Manufacturing - non mining) since Kev07 we have seen a 75% decline in sales and a coresponding loss of our manufacturers and IP to other industries those being China, Taiwan, India and Vietnam - more power to them for be the benificiaries of our stupidity in electing morons to run the place at a time when we needed ability not popularity.
We now have generational debt that eventually someone is going to have to pay for and my kids will have to shoulder the burden of that for long after Im gone.
Until Australia stops digging stuff out of the ground and sending it to somewhere else to make it into goods we buy we will only ever fall further into ruin, only when we consider the mining industry as an anomoly on the countries profit and loss statement will be see the real depth of the trouble we are heading for.
Pay off your debt; put some cash aside -  I dont think we have seen anything yet and the 25 basis points reduction today is just going to make Julia try and convince you all on how good she has control of her economy - dont believe a word of it.
Best I stop ranting now........

211

[bazza]

Well said dave- ginger ninja and smiling assasin our pm should  feck off

[Marc.com]

Yes Marc and the result of that deleveraging has been a higher AUD. What we have done in response to that now re-leverage ourselves as a country to someone else - the Chinese.

Like most things economic it is always a crazy ass juggling act and you can never reallly tell how it is going to turn out. I agree with you that the stimulus package moved the debt from the private sector to the public one, but Australia was hell exposed at the time to a run on interest rates, or triggering an inflationary spiral or both.

No doubt the effect on manufacturing of comparitively high interest in Australia has been catastrophic, in pumping the dollar, but then again Switzerland and Japan and anyone who still had a solvent currency have also shared the same fate with very low interest, so it may not be connected interest but rather risk aversion.

Nobody post Lehman could imagine that the sovereign nations would dip into the tax payers pockets as far as they did to underwrite the crazed risk taking of the financial institutions. If the banks had to cover their losses from their borrowers rather than take a hand out from the tax payer then the outcome could have been quite different. So i think in a country where private borrowing is huge there was no choice but to start the process of discouraging borrowing.

[Bioflex]

Interesting post, it may not make anyone feel better but my business is a very positive example of manufacturing in Australia doing well.
About 6 years ago I spent some time in Japan and realised a large gap in the market, basically Aussie's were paying too much for the type of products yanks paid peanuts for. For the first few years I put everything I had into the business (worked a full time job alongside it) and barely raised a cent, 2.5 years later we employ 12 people, will turn over more than 5 million this year and by years end the business as well as myself should be 100% debt free - which includes assets worth well over a million.

While higher wages for staff and other business expenses make it hard on a global scale, our desperate need to often buy the cheapest at every cost (which is never the Australian option), I honestly think a lot of Australian's are just a bit too lazy and short sighted when it comes to running businesses. Manufacturing like everything can survive here, you just have to be very smart about it.

- Labour costs must be reduced. Efficient systems need to be introduced, effective machinery implemented where possible, and an analysing the competition - which mainly comes from overseas needs to be factored in.
In my business with the actual labour costs of manufacturing being reduced to around 3 -4% of business turnover – which has only been done by setting up very efficient systems, "cheap labour" advantages that our competition may have, whether they are in the U.S (where basic labour rates are almost 1/3rd of ours!) or China (where it is more like 1/10th) just aren’t much of a factor.
I appreciate for very labour intensive industries this variable can’t be reduced as much though, however in many industries, somethings can be done whether it be utilising certain imported components (which reduce some of the costs), however so many people in business (and specifically manufacturing) I speak to have no idea about this, it is as if there is only ever one way to do anything.

Debt seems to be another issue that many Australian’s are completely comfortable with, which in many cases is a major case of businesses failing. For some reason most potential business owners (who have barely done basic financial analyses to see if their dream is viable) feel the need to get the obligatory new car, pay themselves a handsome salary and absorb a huge amount of expenses which they can “claim on tax”, on their business which likely won’t make a profit for a few years. Yet people are surprised that so many businesses fail……

[211kawasaki]

if the labour cost (Marine Manufacturing)here is $40 an hour plus 45% being the real cost of the production hour HTF do you compete with the same process in another country at $1.72 an hour?

Take a look around; notice the down sized firms and the once active industry now vacant and for lease. Take a look at Bunnings, Super Cheap, BCF etc for anything that is made here; there is SFA. My grade 12 economisc is enough to tell me that in a few years we are screwed at this pace.

HTF Wayne Swan kept a straight face when he was handed the Treasure of the year award just confirms that the whole government is run by the blinding light of ego and bugger all else.

[Nathan S]

Welcome to Globalisation and the GFC - its way bigger than Swanny.

What sort of workers are you paying $40/hour? Special skills?

What are you paying for (factory/office) floor space compared to anywhere else in the world?

[Mike52]

Interesting post, it may not make anyone feel better but my business is a very positive example of manufacturing in Australia doing well.

Debt seems to be another issue that many Australian’s are completely comfortable with, which in many cases is a major case of businesses failing.

Good on you Bio , good to hear of someone doing well.
My question is about the debt .
How does a manufacturer buy a late model CNC machine without going into debt?
I owned and ran a small metal fab/ manufacturing buissy and never had the guts to borrow large amounts to fund new equipment.

As the money became available I upgraded but it was a slow painful process and I never got the good efficient gear.
I was bought up in the " if you havn't the cash you can't afford it" era.
The upside to this is that I have no debts except the ones that government impose on me.

[motomaniac]

HTF Wayne Swan kept a straight face when he was handed the Treasure of the year award just confirms that the whole government is run by the blinding light of ego and bugger all else.
[/quote

Getting used to that BS.Remember when Rudd was loosing approval rating fast they got Bill (fing) Clinton to say he was a .... I cant remember(Where's my medication?) ... some build him up BS.
They do it all the time ,Keating was another one and I suppose there was some on the otherside of politics as well.
I think Aussies are starting to wake up to being spoonfeed some BS propaganda or Statistics from overseas.We can see whats going on for ourselves.Can't we???

[Nathan S]

Interesting post, it may not make anyone feel better but my business is a very positive example of manufacturing in Australia doing well.

Debt seems to be another issue that many Australian’s are completely comfortable with, which in many cases is a major case of businesses failing.

Good on you Bio , good to hear of someone doing well.
My question is about the debt .
How does a manufacturer buy a late model CNC machine without going into debt?
I owned and ran a small metal fab/ manufacturing buissy and never had the guts to borrow large amounts to fund new equipment.

As the money became available I upgraded but it was a slow painful process and I never got the good efficient gear.
I was bought up in the " if you havn't the cash you can't afford it" era.
The upside to this is that I have no debts except the ones that government impose on me.

The reality is that business runs on debt nowdays - the difference is whether its good debt or a bad debt...

If you're buying machinery that is going to make more money for the business, then that's a good debt.
Obviously its still a risk that needs to be carefully considered, but at least its pointing in the right direction.

[Mike52]

If you're buying machinery that is going to make more money for the business, then that's a good debt.
Obviously its still a risk that needs to be carefully considered, but at least its pointing in the right direction.

Just too scared to go the extra step I guess Nathan. :'(
BUT the gear I do have in my other shed would make most hobbiests cry

[Marc.com]

Manufacturing like everything can survive here, you just have to be very smart about it.

- Labour costs must be reduced. Efficient systems need to be introduced, effective machinery implemented where possible, and an analysing the competition - which mainly comes from overseas needs to be factored in.
In my business with the actual labour costs of manufacturing being reduced to around 3 -4% of business turnover –

I agree Bioflex, sounds like you are very smart about it and good for you man you just restored my faith in Aussie industry/ Actually the figure of 4% labour content is interesting, we have the same issues where it is just as cheap or cheaper for us to manufacture in Switzerland as China. As long as Australia chooses technology intensive niche industries, then the labor cost ceases to be an issue given that running a CNC production cell in any part of the world is comparatively the same price.

We actually find the cost of manufacture higher sometimes in China given the competition for raw complex raw materials, the availability of good sub suppliers like precision foundries and the general inefficiency of transport infra structure. As was discussed earlier rather than dig up titanium ore and export it, why not turn it into turbine blades and such components which have low labour component.

While we are about it how about some of the tax on BHP and their friends going to start up and higher technologies getting tax support.... like the Koreans and Chinese do.

[GMC]

How does a manufacturer buy a late model CNC machine without going into debt?
I owned and ran a small metal fab/ manufacturing buissy and never had the guts to borrow large amounts to fund new equipment.

As the money became available I upgraded but it was a slow painful process and I never got the good efficient gear.
I was bought up in the " if you havn't the cash you can't afford it" era.

I’m hearing you Mike, I operate much the same way.
I don’t have a lot but I’m reasonably secure.

I was much the same on the race track, didn’t win much but didn’t crash a lot either.

[EML]

I'm with Mike and GMC. Keep you costs down and keep pushing forward.(sounds like being a good passenger)
 The A1 Exhaust store in Mackay has closed as he couldn't find a way to pay for his 200K mandrel bender! WTF he needed it for is beyond me-I can buy mandrels for 4 or 5 bucks each and keep just as many as I might need.
My question here is "how much influence America has in our and other countries (UK) politics?'
Every time we turn around we are getting a visit from some Yanky ex pres or other big mouth.

[Marc.com]

My question here is "how much influence America has in our and other countries (UK) politics?'
Every time we turn around we are getting a visit from some Yanky ex pres or other big mouth.

Not sure i would be taking too much economic advice for US Presidents at this point. The US economy is about 3 times the size of China's so they are the big one, so consequently what happens in the states can have a big influence on global demand and pricing for things like resources.... so US demand shrinks so the Chinese need cheaper raw materials to counter the drop in export revenues, as they are at the moment asking Rio and BHP to drop their ore prices.