Manufacturing Jobs: Australia to Manufacture More of it’s Own Products

Dear Reader,

Darryl is quite proud of his home.

It was a steal when he bought it 15 years ago. Since then, he’s put in a lot of work, time and effort to get it to look the way it does today.

You’ve got to have a passion for something’, he says.

Overtime, he has included several features, like plastic lace, which gives the house a Victoriana feel. A fake chimney, that adds charm and a massive aerial antenna, which Darryl thinks adds value.

The backyard is built on a landfill, but Darryl assures us testing hasn’t shown anything too serious down there, as long as you don’t mind lead.

From his backyard, we can see the powerlines, which Darryl says remind him of our ability to create electricity.

And over the fence you can see the airport’s runway — which is quite convenient if you ever need to take a flight.

Darryl’s home isn’t his only source of pride. There’s also Sealady, his boat.

On some weekends Darryl will take the family to their holiday home in Bonnie Doon, a small town next to a big lake. There he spends his time fishing, or grilling meat on the barbie.

Nights are peaceful on the porch, only disturbed by the sounds of the bug zapper.

Market expert Shae Russell predicts five knock-on effects of the recent market crash that could be even bigger threats to the average investor’s wealth than the crash itself.

How’s the serenity?’ he asks.

By now you’ve probably realised Darryl is Darryl Kerrigan, from the classic Australian movie The Castle. Say what you want about him, but he’s created a tightknit family that supports each other no matter what life throws at them.

He also tries to look at the positives in a bad situation. All good advice in uncertain times like today.

Anyway, I thought of the Kerrigan’s as I passed through Bonnie Doon this past long weekend on my way to Beechworth.

There was a thick fog so you couldn’t view much of the lake, but the house looks pretty much the same as in the movie after all these years. Except that now it’s transformed into an Airbnb for holidaymakers.

Driving into Beechworth, the area is home to vast landscapes, farms and vineyards. Farming and wineries are quite a large part of the economy of the area, but so is manufacturing. The area processes much of their own produce.

While driving we hear on the radio reports of Kmart shelves bare, even though the outbreak is contained and panic buying has subsided. The commentator talks about our reliance on manufacturing from abroad and how the virus has disrupted supply chains.

Manufacturing has been on the decline in Australia

It’s true that manufacturing has been on the decline in Australia for decades.

At its peak in the 1950s, manufacturing accounted for 30% of Australia’s GDP. That figure has now fallen back to 5.7% in 2018.

Mainly because of the development of manufacturing in Asia and China, in particular.

According to Australia’s parliament data, 25% of Australia’s manufactured imports come from China, things like computers and engineering products.

A higher Australian dollar in recent years has also made imports cheaper and increased competition from abroad.

Manufacturing accounts for 6.8% of Australia’s employment, or around one million people, and a high percentage of this (85.5%) is full-time employment. This was all before the outbreak, as of February 2019.

And while manufacturing employment in food and beverages and building materials has been increasing, it’s fallen in other areas. It reflects increasing demand for our agricultural products abroad and the construction boom.

In an Australian Industry Group Manufacturing Outlook report for 2019, manufacturing CEOs said their main concerns were increasing demand against global competition. Their other concerns included energy and skilled labour.

On the radio, we hear the commentator say that stock is expected to arrive to Kmart late June or July, and that consumers are now demanding for more Australian products.

He then moves on to report that China has issued a warning to Chinese students in Australia.

We’ve written before COVID-19 is expediting trends and the trend is looking like it’s moving towards Australia manufacturing more of its own products — especially as tensions between Australia and China increase and the virus affects industries like tourism and education.

We could see more investment flowing into areas like energy, medicine, defence or even recycling.

But building manufacturing is a slow process…and it’s also a reversal from what we’ve seen in the last decade from globalisation. It’s more expensive to manufacture here, which will bring in higher prices.

Driving into Bright now, and the area has had quite a year. First the fires, and then the virus came, hitting tourism — which is quite a large source of income for this area.

But tourism was back for the long weekend. Shops were busy and locals seemed quite happy to receive us.


Selva Freigedo
Editor, The Rum Rebellion

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

The Rum Rebellion