More manufacturing pain as Toyota axes jobs

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By Leith van Onselen

The decline of Australian manufacturing continues, with Toyota Australia today announcing that it would cut another 100 jobs from its Altona assembly line in Melbourne, citing a drop in export numbers.

The latest job losses are on top of Toyota’s decision in January to axe 300 jobs at Altona, which was blamed on the high Australian dollar, as well as the recent decision by Ford to cease local car production from 2016, and Holden’s axing of 500 jobs earlier in the year in addition to a three year pay freeze.

As noted last week, the Australian manufacturing sector, and the car industry in particular, does look to be in terminal decline.

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The most recent quarterly employment data from the ABS shows the total number of people employed in manufacturing and the sector’s employment share falling sharply over the past 30-years (see next chart).

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Manufacturing capital expenditures (capex) has also tanked, falling from 2.1% of GDP in 1987 to only 0.6% of GDP as at June 2013 – an all-time low (see next chart).

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The high dollar, in part caused by the mining boom, represents a classic Dutch Disease situation for Australia, whereby the non-mining tradable sector contracts to make way for mining. The problem going forward is that outside of mining investment, the mining sector is not a big employer. So once the epic mining capex boom unwinds, Australia will be left with a big employment hole that cannot be filled.

Australia desperately needs a new reform agenda aimed at improving competitiveness, encompassing everything from land supply, competition policy, energy policy, wages policy, etc. Measures also need to be implemented that place downward pressure on the Australian dollar.

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Easier said than done, of course.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.