AS AUSTRALIA haemorrhages jobs in the manufacturing and service sectors, leading business figures claim a more flexible labour market may be key to riding out the storm.
Toyota was the latest company to announce job losses, with 350 staff at its Altona plant forced to take redundancy.
Ross Barker, managing director of the Australian Foundation Investment Company, believes sagging productivity could be improved by greater flexibility in the labour market.
"It's pretty clear in recent years there's been a decline of productivity growth," Mr Barker said. "We think that doesn't augur well further down the track when the terms of trade isn't as it has been in recent times."
Peter Burn, director of public policy at the Australian Industry Group, said "a lot of people who lose jobs, find jobs in manufacturing". But he said there was a risk of skills atrophy where people stayed out of an industry so long they became "lost to the economy".
Mr Burn said manufacturers were under unusual pressure from the high dollar and were looking to reduce hours rather than lay people off.
HSBC chief economist Paul Bloxham said manufacturing had been in cyclical decline in Australia since the 1950s. "It's not possible for Australia, with our high cost base and wages, to compete with countries in Asia," Mr Bloxham said.
The minimum wage in Australia is $15.51 an hour, not including compulsory 9 per cent superannuation, compared with the equivalent of $9 in Britain and $7 in the United States. In Tokyo, once considered one of the most expensive labour markets in the world, the minimum wage is $10.16.
The high dollar has inflated these differences, but Australian workers remain among the most expensive to employ in the Western world.
Steven Wojtkiw, chief economist at the Victorian Employers Chamber of Commerce and Industry, said high penalty rates had hurt the tourism and retail sectors, which relied on a flexible and adaptable workforce.
But Nixon Apple, an economics adviser with the Australian Manufacturing Workers Union, said returning to WorkChoices-style labour laws would backfire. He said the "take their Christmas cake" style of cost-cutting was discredited as leading to "high-stress, low-trust workplaces" that stymied productivity.
Mr Apple said productivity would be buoyed by more research and development into clean technology, which he said was a game-changer for manufacturing in Australia.
Tim Harcourt, author of The Airport Economist and an economics fellow at the University of New South Wales, said lots of green architecture in China and India came from Australia.
In the car industry, he said Australian companies doing research and development in Moorabbin were now working with factories in Thailand.
Mr Apple said: "In the decade to 1996, manufacturing research and development grew by more than 10 per cent a year. Since 1996, it has grown by less than 2 per cent. Over a decade, that's the difference between night and day. If it happens again in the next decade, then you can pretty much come close to kissing manufacturing goodbye."