Manufacturing in Australia - A Statistical Overview

Stephen Barber
Statistics Group

The manufacturing industry in Australia has come under much scrutiny in recent times, especially in relation to tariff protection for the industry as a whole and certain sections of the industry in particular. This note presents some of the statistics that are available for the manufacturing industry as a whole and gives an historical perspective over the last 30 to 35 years.

Size

Currently, the manufacturing sector has a gross product (GP) of nearly $70 billion. [Where gross product is the value of goods and services produced in Australia less the cost of goods and services used up in the production process and before allowance has been made for the consumption of fixed capital (depreciation)].

Manufacturing is Australia's largest industry, with wholesale trade ($50 billion), property and business services ($40 billion), retail trade ($35 billion) and finance and insurance ($35 billion) completing the top five.

However, Chart 1 shows the decline in the dominance of the manufacturing industry since the early 1960s. In 1962-63, it was over a quarter (26.2%) of Australia's gross domestic product (GDP) but by 1995-96 its contribution has declined to little more than a seventh (14.3%).

Employment

Thirty years ago, manufacturing provided over 1.2 million jobs and was a major source of employment. Its position as a significant employer was only rivalled by the combined wholesale and retail trade industries.

Today, however, manufacturing employment is still around the same level (1.1 million people) although total employment in Australia has increased from 4.8 million to 8.3 million over that time. The retail trade industry on its own has employed more people than manufacturing since the early 1990s.

Chart 2 shows the trend in manufacturing employment when expressed as a percentage of total employment. The picture is almost identical to that shown by Chart 1. In 1966, nearly 26% of jobs were in manufacturing. In 1996, this has reduced to just over 13%.

Exports

Exports of manufactured goods as a proportion of total merchandise exports have more than doubled over the last 30 years from less than 14% in 1963-64 to 33% in 1996-97. The evolving trend, shown in Chart 3, has two distinct periods of increasing share-the 1960s through to the early 1970s and from the mid 1980s-sandwiching a period of gradual decline.

Over the last four years exports of manufactures have become greater than either mining or agricultural exports. In 1996-97, exports of manufactures are valued at almost $26 billion while mining and agricultural exports are valued at just over $23 billion each.

The decreasing proportion of the manufacturing industry overall, measured in relation to GDP, combined with the above information on the increasing share of exports of manufactures means that the production of the manufacturing industry is now being directed away from sales and consumption within Australia and directed to foreign markets.

This can be seen from Chart 4, where exports of manufactures have been expressed as a percentage of manufacturing gross product. From the early 1960s the share of manufacturing production that was exported was around 8%. The share then increased gradually to 15% by the early 1970s and then plateaued until the mid 1980s. In the 9 years from 1986-87, the proportion has increased steeply so that in 1996-97 over a third of manufacturing production was exported.

STMs and ETMs

Australia's exports of manufactures can be split into two types, simply transformed (STM) and elaborately transformed (ETM).

These terms refer to the amount of processing that are made to the inputs to the manufacturing process. STMs are mainly basic metal manufactures, e.g., aluminium ingots. ETMs, which form the major portion of world trade in manufactures, are defined as finished goods or goods that have unique qualities that allow them to be differentiated from other manufactured goods. ETMs have a high degree of manufacturing value added.

Chart 5 shows the proportion of Australia's exports of manufactures that are STMs or ETMs since 1971-72. Over this period, it can be seen that ETMs hovered between 50% and 60% of exports of manufactures for nearly 20 years. However, over the last eight years exports of ETMs have trended upwards to around 70% of exports of manufactures. It seems that Australia has changed its focus to provide more finished goods and rely to a lesser extent on 'traditional' (STM) products of unworked iron, steel and non-ferrous products.

Sources:

ABS, National Income, Expenditure and Product (Cat nos 5204.0, 5206.0)

ABS, International Merchandise Trade, Australia (Cat no 5422.0)

ABS, Labour Force, Australia (Cat no 6203.0)

DFAT, Exports of Primary and Manufactured Products.