The COVID-19 pandemic has directly affected all industries, businesses, and workers in Australia throughout 2020. The Government’s response to the pandemic has highlighted the central role of manufacturing in recovering from this event and its importance in bolstering Australia’s economic resilience. What are the long-term trends in manufacturing and the impact of COVID-19 on the industry?
Manufacturing employment: long-term trends in Australia
Australian manufacturing employment peaked at 1.46 million in 1973 (see Chart 1). It accounted for a quarter of the workforce throughout the 1950s and the 1960s. Since the 1970s, changes in manufacturing technologies, products, regulatory environments, and global supply chains – together with the rise of various services sectors as key drivers of local employment growth – have seen manufacturing’s share of Australia’s workforce decline. This long-term evolution has been part of a global trend that has been evident across all ‘advanced’ manufacturing economies, as technologies and products have changed and as more of the ‘developing’ world has become involved in global manufacturing supply chains.
Despite the declining number and share of Australian workers employed in manufacturing since the 1970s, the sector’s output volumes have continued to grow, as local manufacturing technologies and businesses have become progressively more advanced and capital-intensive. Since the 1970s, the decline in local manufacturing employment has tended to happen in waves, with particularly large declines in textiles, clothing, and footwear employment during the last recession from 1991 and then smaller declines in other manufacturing sectors after the Global Financial Crisis (GFC) from 2008 and the subsequent period of exchange rate disruptions, in which the Australian dollar (AUD) rose above parity against the US dollar over a very extended period (roughly 2010 to 2013). This latest period has been overlaid with changes to global manufacturing technologies and production systems (including, for example, the dissemination of digital technologies), as well as the rise of China as a manufacturing and exporting powerhouse.
Over the decade since 2010, Australian manufacturing has recovered (or at least stabilised) its output, exports, and sales, but it has also undertaken some important rebalancing and restructuring in terms of sectors, products, technologies, and supply chains, in response to these bigger, long-term, global trends. These shifts in focus are reflected in some notable changes to the manufacturing workforce in recent years (see Ai Group Manufacturing in 2020 Report).
The Australian Bureau of Statistics (ABS) Labour Account data series and the Ai Group Australian Performance of Manufacturing Index both indicate that the total number of manufacturing jobs in Australia stabilised and then began to rebuild between 2015 and early 2020, despite the loss of local passenger car assembly as a major anchor of local manufacturing activity during this period. In 2020 however, this recovery is being severely disrupted by the COVID‑19 pandemic. Manufacturing lost 56,600 jobs in the second quarter of 2020 (see Chart 2), which is equivalent to most of the jobs recovered between 2015 and 2020.
Despite this sudden decline, other data from the ABS and ATO (for payroll jobs paid through the ATO single touch payroll system) suggest that as of October of 2020, the manufacturing industry is faring better than most industries during 2020 (see chart 3). This experience is different from previous Australian recessions (e.g., in the 1980s and 1990s) and reflects the very unusual circumstances of the current COVID-19 recession. In previous Australian recessions, employment in industrial sectors such as manufacturing and construction have fallen the hardest. In contrast, the COVID-19 recession has impacted the service industries such as travel, hospitality, and the arts the earliest and the hardest due to rapid activity restrictions, enforced business closures, and border closures. As of October 2020, however, there are signs that the COVID-19 recession may be transitioning into a more traditional recession, with construction jobs declining in recent months and the initial recovery in manufacturing jobs stalling.
Manufacturing workforce characteristics in 2020
On the eve of the COVID-19 pandemic in February 2020, Australia’s manufacturing workers were older, more likely to be male, more likely to be working full-time, and less likely to have tertiary qualifications than all Australian workers:
- 649,000 (71%) of the manufacturing workforce were male, and 260,100 were female (29%) compared to 47% of the entire workforce that is female.
- 183,900 (20.2%) were aged 55 years or older compared to 19.3% for the entire workforce.
- 193,900 (21.3%) were aged 29 years or younger compared to 26.7% for the entire workforce.
- The average age in manufacturing was 42.0 years compared to 39.8 years for all industries (data from May 2018).
- 774,000 work full time (85%) and 135,000 work part-time (15%) compared to 31% of the workforce that is part-time.
- Average work hours per week were 37.3 hours compared to 33.0 hours for the entire workforce.
- 804,600 are employees, of which 139,800 are ‘casual’ (17.3%) compared to 24.2% for all employees.
- 19% of manufacturing employees have a bachelor degree or higher, 41% have a Certificate I to an advanced diploma, and 39% are without post-school qualifications compared to 34% of all employees who have a bachelor degree or higher, 34% who have a certificate I to advanced diploma and 32% who are without post-school qualifications.
Across manufacturing industries, food product manufacturing is the largest sector for manufacturing employment in Australia, followed by machinery & equipment and metal products (see Table 1). Over the past five years, there has been strong employment growth in ‘food & beverages’ manufacturing, ‘metal products,’ and the ‘building materials, wood, furniture & other manufacturing’ industries. Food and beverage manufacturers have benefitted from a lower Australian dollar and steady growth in international (mainly Asian) demand for Australian food & beverages. Demand for building-related products has been strong over the past five years due to elevated levels of local construction activity; however, this demand appears to have eased from 2019.
Since the COVID-19 pandemic began to be felt locally in Australia from March, employment has fallen in most manufacturing industries. The ATO payroll data suggest that from 14 March to 19 September, the hardest-hit manufacturing sectors in terms of job losses were ‘beverage products,’ in which payroll jobs fell by 10.2%, followed by ‘pulp, paper & converted paper products,’ in which payroll jobs fell by 8.1% (see Chart 4). The fall in beverage manufacturing jobs probably reflects large declines in consumption due to restaurants and hospitality venues closing nation-wide in Q2, while the drop-in paper manufacturing jobs might reflect a decline in demand for paper-based office products due to fewer people working in offices.
In contrast, chemicals production was the only manufacturing sector that increased the number of jobs over this period, reflecting the continuing strong demand for personal care items (e.g., hand sanitizer), pharmaceuticals, cleaning products, toiletries, and health supplements, much of which is made locally by this sector. Many Australian manufacturers in this sector (and others) have reported to Ai Group a stronger interest in Australian-made products due to overseas stock shortages, freight delays, and disruptions. Some manufacturers, wholesalers, and distributors say their suppliers are thinking about ‘reshoring’ their production activities back to Australia due to ongoing disruptions to global supply chains and freight services. This is particularly evident in traditional ‘heavy industrial’ manufacturing sectors such as metal products and machinery manufacturing, but also in chemicals, building materials, wood, furniture & other sectors.
Manufacturing employment across Australian states in 2020
Between 1990 and 2010, the decline in Australian manufacturing employment was mainly felt in New South Wales, Victoria, and South Australia. These states were home to Australia’s textile clothing and footwear industries (that declined steeply in the 1990s) and passenger car assembly, which declined over this period and ended in 2017. In contrast, manufacturing in Western Australia and Queensland has always been more closely aligned with food and beverages, machinery and equipment, and other manufacturing and so manufacturing employment in these states held relatively steady over this period. Manufacturers in these two states also benefited from a rise in demand from their local construction, mining, and agricultural industries.
In 2020, the COVID-19 pandemic has affected some of Australia’s large manufacturing states more than others. In Victoria, many manufacturers were required to close or operate at reduced capacity for several months because of ‘second wave’ COVID-19 activity restrictions in the third quarter of 2020. Many remain closed or operating at reduced capacity as of early November. There were 13,813 employing manufacturing businesses that employed 294,000 people in Victoria at the start of the pandemic. Initially, Victorian manufacturing jobs were faring better than the rest of the country. Since July, however, the second wave of activity restrictions has seen manufacturing jobs fall further in Victoria than in other states. Victorian Manufacturers with multiple sites around the country report that Victoria’s extended ‘wave 2’ lockdown is detracting from demand in other states as well as in Victoria. Outside Victoria, manufacturers could open and operate close to normal conditions again from June.
Growing Australia’s manufacturing jobs for the future
Australia’s economic and social strength go hand in hand. The fundamental requirements include: building a more dynamic and higher productivity economy; achieving a more inclusive economy and society; and ensuring that Australia moves decisively to net zero emissions by 2050. Australian manufacturing will play a central role in securing all these objectives.
For more information about Ai Group’s detailed policy positions, see: https://www.aigroup.com.au/policy-and-research/policy-papers/
 This trend is exemplified by the ‘smile curve,’ which is a visual representation of value-added content along the production cycle. Many manufacturing firms have adjusted their businesses’ structure by outsourcing production-specific activities and focusing their efforts on the high-value activities in the smile curve. See Ai Group’s “Australian Manufacturing in 2019” Report.
 Does not include owner-managers and contributing family workers.
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