Aussie processing still contracting, firms call for spending growth

In recent weeks alone, two iconic brands have fallen on tough times, with fruit and tomato canner SPC cutting orders from farmers and Spring Gulley jams and pickles falling into receivership.

Aussie dollar​

Showing a contraction of 7.7 points on March, AI Group’s April study, which covers the entire manufacturing sector, including food and beverage production, recorded its lowest level since 2009. And, as usual, the strong Aussie dollar has had a big part to play in this slump.

“The sharp drop in manufacturing production, employment and new orders in April, along with the continued erosion of exports, is deeply concerning​,” said Innes Willox, the group’s chief executive. ​

“The strength of the Australian dollar is a major burden on domestic producers and our rising unit labour costs and high energy prices are adding to pressures​.”

To combat these factors, businesses have called for stimulatory spending to boost productivity and competitiveness.

Budget priorities​

Accompanying the performance report, AI Group also released the findings of a survey that ranked their priorities ahead of Australia’s next Budget. More than 40% nominated a cut to the company tax rate as their top demand, while a third of all businesses counted increasing infrastructure as their most important objective.

"While businesses appreciate the need for Budget discipline, in this slowing economy the majority of businesses rank objectives that will help rebuild competitiveness more highly than bringing the Budget back into balance​,” continued Willox.

“Almost five out of 10 businesses surveyed rated balancing the 2013-14 budget as being a lower priority than reducing the company tax rate, increasing infrastructure spending, lifting expenditure on workforce training, and improving incentives for research and development​.”

Further slowing​

A relatively small proportion of the businesses surveyed—16%—nominated a balanced Budget as a higher priority than these other, nation-building objectives.

"There is a growing and very real concern that an excessively contractionary Budget in 2013-14 will not only further slow the economy but will also put downward pressure on future growth and therefore on future taxation revenue collections. This would be a worse outcome for both the Federal Budget in 2013-14 and for the public sector debt position​," Willox added.