Struggles Faced by Australian Manufacturers amid High Inflation and Government Policies
Introduction:
Australian manufacturers have recently expressed their difficulties in staying afloat due to the impacts of high inflation and government policies. These challenges have made it increasingly tough for companies to thrive in the current economic climate.
Rising Costs and Financial Struggles:
Matthew Fogarty, the director of Celsius Manufacturing Pty Ltd, a Victorian-based company specializing in ductwork, highlighted the significant increase in costs over the past couple of years. He mentioned that the prices of essential materials such as steel and insulation had skyrocketed, resulting in higher import input costs. Fogarty revealed that he had to sell and mortgage his personal belongings to keep the business running, yet the returns were meager. Such financial strains raise questions about the risks involved in running a business and the lack of reciprocation from the government.
State Taxes and Energy Policies:
Simon Whiteley, the managing director and CEO of Corex Plastics Australia, also shed light on the challenges faced by his company. He emphasized the impact of state taxes, noting that his land tax bill had increased by 200 percent over four years in Victoria. Additionally, payroll tax and WorkCover insurance had risen by 78 percent in the past year. Whiteley further highlighted the detrimental effect of state governments’ energy policies on manufacturers. He specifically mentioned the limitations imposed by the Victorian government, making it difficult for companies to invest in energy technologies other than solar. However, investing in solar energy proved to be unprofitable due to negative energy prices during the day, which hindered the returns for renewable energy operators.
Negative Energy Prices and Industry Concerns:
The issue of negative energy prices has raised concerns within the energy industry. Negative prices occur when energy generators pay consumers to generate electricity, indicating an oversupply of energy. The Australian Energy Council predicts that negative revenues caused by negative energy prices will surpass $800 million in 2024 and over $1.1 billion in 2025. This situation poses a significant challenge for manufacturers and further exacerbates the difficulties they face.
Suppressed Gas Supplies and Price Increases:
Jon Seeley, the group managing director of air conditioner manufacturer Seeley International, echoed the frustrations expressed by other manufacturers. He pointed out that the Victorian government’s energy policy had led to a suppression of gas supplies, resulting in substantial price increases for consumers and businesses. This situation places an additional burden on manufacturers, making it harder for them to operate and remain financially sustainable.
Industrial Relation Law Changes and Job Losses:
Seeley also highlighted the recent changes in industrial relation laws, which would lead to unnecessary job losses in his firm. Due to the complexity and ambiguity of the new laws regarding casual employment, Seeley had to make the difficult decision to stop hiring casual staff and consolidate the company’s operations into one factory. This decision would unfortunately result in the loss of jobs for 85 permanent employees in Albury. These job losses emphasize the negative consequences of regulatory changes on businesses and the livelihoods of employees.
Increased Overhead Costs:
A member of the South East Melbourne Manufacturers Alliance shared their experience of increased overhead costs due to the additional labor costs incurred to manage the changes in industrial relation laws. The company’s overhead costs had risen by $600,000, adding to the financial struggles faced by manufacturers.
Conclusion:
The struggles faced by Australian manufacturers due to high inflation and government policies are evident. The rising costs of materials, the impact of state taxes and energy policies, changes in industrial relation laws, and increased overhead costs have all contributed to the difficulties faced by manufacturers in staying afloat. These challenges highlight the need for policymakers to consider the implications of their decisions on businesses, job security, and the overall economy.
