Australian Chamber – Westpac Survey of Industrial Trends December 2020 | Aussie production soars, jobs to pick up in 2021

Australian manufacturing production is at its highest level this year with industry jobs expected to increase in 2021, Australia’s leading survey on manufacturing trends has found.

Latest quarter results from the Australian Chamber-Westpac Survey of Industrial Trends show Australian industry is expecting demand and orders to significantly improve, encouraging business to step up output.

“Manufacturers are telling us that they’re optimistic at this point, and expecting demand to go up, particularly as household consumption climbs,” ACCI CEO James Pearson said.

“Gathering momentum in the housing sector in response to low interest rates and the Home Builder scheme is playing a key part.

“We also know that Australian businesses and consumers are looking to support Australian companies and source Australian made products as much as possible, in light of trade restrictions and supply chain disruptions.

“To be sustainable, our recovery must be based on more than pent-up domestic demand aided by government stimulus. In 2021 we need to re-open our international borders in a safe and controlled way to accelerate the trade engine that drives much of the Australian economy; we need to follow through on industrial relations reform to make it easier to hire people and create jobs; and we need to tackle tax reform to reward aspiration and incentivise investment and entrepreneurism.”

Westpac Senior Economist Andrew Hanlan said: “The survey reports activity conditions improved in the final quarter of 2020 as the economy reopened following the shock of COVID-19.

“The Wespac-AusChamber Actual Composite lifted to 48.4 in the December quarter, up from 42.8 in the September quarter. This recovery follows the dramatic fall to 24.0 in the June quarter associated with the initial lockdown and the response to COVID.

“With the activity index nearing 50 in the December quarter, this suggests conditions are stabilising in the manufacturing sector, an improvement on the declines earlier in the year. The survey reports that output has expanded for the first time this calendar year whilst new orders only contracted marginally.

“Respondents are upbeat about prospects for their own businesses, buoyed by the end of Victoria’s second lock-down and positive vaccine news. The Expected Composite leapt to 69.1 in December from 46.1 in September, eclipsing the highs seen during the rebounds that followed previous downturns.

“This upbeat mood reflects an expected burst of new orders and output at the start of 2021, in part a catch-up after a challenging year.

“The December survey saw a turnaround in profit expectations, with a net 23 per cent of firms expecting profitability to improve in coming months. Investment plans have also improved, with a net 26 per cent of firms planning to increase equipment investment in the coming year.

“As to employment prospects for the manufacturing sector, a net 16 per cent of respondents intend on expanding their workforce early in 2021 in response to the burst of new orders. This is a turnaround from the experience through much of 2020 when staffing levels declined in the face of falling activity.”

Read the full report here.