New orders for Australian manufacturers rebounded after a slow start to the year, with economist Wells saying demand was improving but the outlook remained challenging. The Westpac-Australian Chamber of Commerce and Industry (ACCI) real composite index rose from 43.4 in the March quarter to 54.1 in the June quarter, exceeding the 50 balance line and signaling an improvement in the manufacturing sector. A rebound in new orders and increased production were key, but employment and overtime fell.
Manufacturers last year’s tough economic environment, stagnant new order growth, to 2024 March orders plummeted, slow recovery after the summer vacation, but expected short-term weakness, June orders rebounded strongly, 20% net company said growth.
Expectations composite index fell from 54.7 in March to 52.8 in June, signaling a slowdown in demand improvement. Manufacturers were constrained in their expansion by supply shortages and labor shortages. 71% of companies reported a sharp rise in costs, with annual average costs falling from 68% in June 2022 to 51% in June 2023, down but still higher than in previous periods.
Manufacturers’ sentiment towards the outlook for the next six months has improved slightly but remains pessimistic, with 42% more expecting deterioration than improvement in June, compared to 56% in March. Profit expectations have been boosted by a pick-up in demand, but significant and volatile cost pressures are weighing on manufacturers, with profits well below average and overall expectations for flat profits over the next year.
The Acci chief sees the economy in a precarious state and warns that restrictive labor laws will exacerbate business challenges. He emphasized the need for increased business investment to boost productivity and economic growth and called on the government to take immediate action to address productivity issues. In addition, he mentioned that the minimum wage increases approved by the Fair Work Commission placed an additional burden on businesses.
The Australian manufacturing sector is currently facing multiple challenges. It can control operating costs through lean production and cost optimization measures, invest in advanced technology and automation to reduce reliance on labor and lower costs; develop new export markets to reduce dependence on a single market and enhance demand stability; and encourage enterprises to increase investment, especially in R&D and innovation, to enhance product Competitiveness.
