Let’s bust the myth that Australian manufacturers can’t compete!

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Article by Steve Eagle, Co-Founder and Director at How To Buy Australian Made

Every week I speak about Australian manufacturing on TV or radio. My message is simple – we CAN compete globally. I’ve had millions of video views on Facebook and YouTube. And while many comments are positive, a negative I often get is “Australian manufacturing is non-existent”, or “Aussie-made products are way too expensive”. 

Let’s bust these myths:

Myth #1
Australia’s manufacturing sector has dwindled to almost nothing.

Reality #1:
Australia has over 90,000 manufacturers across almost every industry. And the sector is currently growing faster than at any time in the last 30 years. 

The recent Australian Chamber of Commerce and Industry and Westpac Survey of industrial trends showed that the Manufacturing composite index lifted to 64.5 in the June 2022 quarter, (anything above 50 means expansion). That’s up from 56.7 in March and 51 over the second half of 2021, during the delta lockdowns. 

A recent survey of Aussie manufacturers shows that a whopping 55% of them are planning to bring their manufacturing back from overseas in the next 3 years, and 22% already have. “Reshoring” as it’s known, is being driven by the supply disruptions experienced as a result of Covid, along with increased demand for locally made products by consumers, corporates and governments.

Myth #2
Australian manufacturers can’t compete because our labour costs are too high. 

Reality #2
The cost of labour makes up only about 13% of the total manufactured cost of Australian products. That’s because Australia uses a high proportion of automation compared to countries like China.

A 5.2% increase (the latest minimum-wage hike) of the 13% of labour cost is equivalent to a 0.7% increase, or 70 cents for every $100 – a miniscule amount.

The reality is that wages in other countries have been growing much quicker than Australia’s. Chinese labour rates have more than doubled in the last 10 years while Australia’s have stagnated – now Australia is simply playing catch up.

Myth #3
People won’t buy Australian-made if there’s a cheaper import available.

Reality #3
Demand for Australian-made is the highest it’s ever been, with a recent Roy Morgan poll showing that 96% of Australians prefer to buy locally made over imports. And they are prepared to pay up to a 17% premium compared to an import

Imported goods are not necessarily cheaper. Remember, with imports you need to add the cost of international shipping and customs. This is usually about 35% of the cost of goods – but with current disruptions shipping costs can be as high as 50% of the cost of goods

Australian-made products are often higher quality, and therefore better value than their imported counterparts. That’s because Australian manufacturers are required to meet some of the highest quality and safety standards anywhere in the world. Yes, this translates into slightly higher costs, but this is offset by lower returns, and more durable, longer-lasting products. In other words, “you get what you pay for”.

Australian manufacturing is something to be proud of! We need to support it as much as we can. Let’s stop bagging the Australian manufacturing industry, and instead do everything we can to help it continue to grow.