The Australian Food and Grocery Council has called for targeted investment allowances for Australian food manufacturers, whilst releasing its 2017 State of the Industry report.
The AFGC State of the Industry report also revealed that the AUD $127.4 billion Australian food and grocery sector added more than 7, 300 jobs in 2015-16.
“We are seeing an increased focus across the food industry on any and all projects that can reduce energy use as energy prices continue to rise.” Andrew Newby, Advisory Services Director, Wiley.
AFGC Media Release:
The Australian Food and Grocery Council’s (AFGC) ninth annual industry snapshot State of the Industry 2017 released yesterday, shows that the $127.4 bn Australian food and grocery sector added more than 7,300 jobs in 2015-16, reflecting significant resilience in the sector.
AFGC CEO Ms Tanya Barden said the State of the Industry 2017, compiled by EY, highlights strong employment growth and encouraging capital investment, however, falling exports and flat overall turnover are clear warning signs for the future of Australia’s largest manufacturing sector.
“The food and beverage, grocery and fresh produce sectors employ 320,300 people representing over 33 per cent of Australian manufacturing jobs despite a small decrease in industry turnover by a third of a percent to $127.4 billion,” said Ms Barden.
“There is no doubt Australia’s largest manufacturing sector is facing an environment where input costs are rising on everything from commodities to labour to energy, and six years of retail price deflation continues to cut margins, placing the sector under increasing pressure.”
“We are expecting these pressures to only increase as energy, especially gas, has seen a doubling and in some cases a tripling of price that is likely to have dire consequence for Australian jobs and investment, with some companies re-assessing their long term future in Australia.”
“While a 4.7 per cent increase in capital investment is welcome, reversing the last three years of decline, expected increases in input costs could stall this recent turnaround in investment and employment.”
“Continuing to stimulate investment in site modernisation is critical particularly in light of mounting input cost pressures. We are now in danger of drifting into a low investment trap, where uncertainty about return on investment flowing from retail price deflation and rising costs is seeing investment decisions deferred or dumped,” said Ms Barden.
The AFGC recommends that targeted investment allowances be adopted to bring forward investments in Australia, to retain jobs and businesses here, particularly in regional areas where approximately 40 per cent of the sector’s jobs are located.
“The ability to realise premium prices for value-added food and beverage products in growing export markets is a key source of future growth and contrasts with the low growth, deflationary domestic trading environment,” said Ms Barden.
“While at first glance, a 15.4 per cent decline in the real value of food, beverage and grocery exports is alarming this decline appears driven by price and cyclical events. In nominal terms, exports have increased by 3.6 per cent, which is still below recent strong export growth trends and below where Australia should be, given our trading advantages into key markets of China, Japan and Korea.”
“This a healthy reminder to redouble efforts to maximise the hard fought gains of free trade agreements and attack the rising costs of manufacturing,” said Ms Barden.
Glenn Carmody, Consumer and Industrial Products Market Segment Leader, EY, similarly commented on the industry’s strengths and challenges. “The food and grocery sector continues to play a very important role in the Australian economy. The 2017 Australian Food and Grocery Council’s State of the Industry Report found that the industry contributes strongly to international trade and is a key employer, particularly outside of metropolitan areas,” said Mr Carmody.
“Growing markets in Asia and the improvement of market access through FTAs should further support the industry’s growing export market and provide additional opportunities. However, the report has highlighted that the industry faces a number of challenges including addressing the decline in productivity to ensure the industry remains internationally competitive,” said Mr Carmody.
Key facts from the State of the Industry 2017 report on the food, beverage and grocery sector, using the most up to date data from the ABS and other sources:
- Industry turnover $127.4 bn, down 0.3% in real terms; 2015-16 data
- Direct employment 320,302, increase 7,317 people; 2015-16 data
- Industry made up of 30,748 businesses; 2016-17 data
- Capital investment of $2.7 bn, up 4.7%; 2015-16 data
- Total international trade $67.9 bn (down 8.1%); 2016-17 data
A copy of the 2017 State of the Industry Report can found on the AFGC website. Click here