The $131 billion food and beverage, grocery and fresh produce sector now accounts for nearly 40 per cent of Australian manufacturing jobs, but has battled challenging conditions through 2016-17, according to the AFGC's State of the Industry 2018 report.
The Australian Food and Grocery Council’s (AFGC) annual industry snapshot, compiled by EY, revealed a number of challenges have created relentless pressure back through the supply chain, and the peak body is now calling for targeted investment allowances.
“There is no doubt Australia’s largest manufacturing sector is facing a tough environment where input costs are rising on everything from commodities, particularly caused by the drought, to labour to energy, and six years of retail price deflation continues to cut margins, placing the sector under increasing pressure,” AFGC CEO Tanya Barden says.
“It has now however reached the stage where this pressure is placing strain on the sector.
“While the food and beverage, grocery and fresh produce sectors directly employ 324,450 people, there was a 1.4 per cent decline in employment in 2016-17. There was also a small decrease in industry turnover by 2 per cent to $131 billion.
“A 10.3 per cent decrease in net capital expenditure, off the back of a decade of declining investment, reflects a genuine concern that increases in input costs coupled with depressed pricing makes the case for investment difficult at this critical time.”
Barden stressed the need for industry to continue to stimulate investment in site modernisation, particularly in light of mounting input cost pressures.
“We are now in danger of drifting into a low investment trap, where uncertainty about return on investment flowing from retail price deflation and rising costs is seeing investment decisions deferred or dumped.”
The AFGC recommends that targeted investment allowances be adopted to bring forward investments in Australia, to retain jobs and businesses, particularly in regional areas where approximately 38.8 per cent of the sector’s jobs are located.
In contrast to the domestic market, the report highlights that the industry’s growth prospects increasingly lie in export channels.
