Why Australian manufacturing is dying

The following graphs from the Productivity Commission Preliminary Report on Australia’s Automotive
Manufacturing Industry
give an insight into the problems facing Australian manufacturers.

The first graph compares average hourly labor costs for auto-manufacturers in different countries. Australia is second-highest (behind Germany), in terms of labor cost per hour, and roughly 7 times as high as China and India — ignoring local ABS figures for which there are no comparatives.

Hourly Labor Costs

The second graph shows how the rising Australian Dollar has impacted on local auto-manufacturing.

Australian motor vehicle production compared to the trade weighted exchange rate

The local market is not big enough to sustain a competitive auto-manufacturing industry, but that argument does not seem to have hindered five of the top seven global manufacturers — Volkswagen, Hyundai, Toyota, Nissan and Honda — whose local markets are of a similar scale to our own. The difference is that they have adopted a global outlook rather than focusing on their own domestic market as Australia has done.