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."
Frequently Asked Questions about this Article…
What recent job cuts in Australian manufacturing were reported and which company was affected?
The article reports job losses across manufacturing and services in Australia, and highlights Toyota as the latest example — about 350 staff at its Altona car plant were made redundant.
How could a more flexible labour market help Australia’s productivity and investors?
Business leaders in the article argue that greater labour-market flexibility could help reverse sagging productivity growth. Faster productivity can support company profits and industry resilience, so investors often watch policy and labour trends that affect firms’ cost structures and competitiveness.
How is the high Australian dollar affecting manufacturers and investment in the sector?
The high Australian dollar is putting unusual pressure on manufacturers by inflating labour-cost differences with other countries. That pressure is prompting some firms to reduce hours rather than cut staff and makes it harder for high-cost Australian operations to compete with lower‑cost Asian factories, which is relevant for investors tracking manufacturing performance.
What does the article say about Australia’s minimum wage and how it compares internationally?
The article notes Australia’s minimum wage is about $15.51 an hour (excluding compulsory 9% superannuation), compared with roughly $9 in Britain, $7 in the United States and about $10.16 in Tokyo — illustrating that Australian labour is among the more expensive in the Western world, a factor that can affect company margins and investor expectations.
Which sectors are identified as being hurt by high penalty rates and needing flexible workforces?
The tourism and retail sectors are singled out as being hurt by high penalty rates because they depend on a flexible and adaptable workforce, according to the Victorian Employers Chamber of Commerce and Industry — a point investors may consider when assessing consumer‑facing stocks.
Would returning to WorkChoices‑style labour laws help manufacturing, according to the article?
No — an adviser from the Australian Manufacturing Workers Union argues that reverting to WorkChoices‑style rules would backfire. He says such cost‑cutting approaches created high‑stress, low‑trust workplaces that actually stymied productivity, rather than improved it.
How important is research and development (R&D) for the future of Australian manufacturing?
The article highlights R&D — especially in clean technology — as a key way to boost productivity and help manufacturing compete. It notes R&D growth in manufacturing rose more than 10% a year up to 1996 but has grown by less than 2% annually since then, a decline that experts say risks undermining the sector if it continues.
What are the risks of skills loss (skills atrophy) from prolonged job cuts, and why should investors care?
The article cautions that while displaced workers often find other manufacturing jobs, long periods out of an industry can lead to skills atrophy where workers become 'lost to the economy.' For investors, sustained skills loss can weaken industry capacity, slow recovery, and affect long‑term productivity in sectors they follow.
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