Food and grocery sector delivers 7300 more jobs

More than one-third of Australian manufacturing jobs are in the food and beverage, grocery and fresh produce sectors. This sector turned over $127.4 billion in 2015/16 and delivered an extra 7300 jobs in the same time.

The Australian Food and Grocery Council has released its ninth annual industry snapshot, ‘State of the Industry 2017’, which revealed the strong employment growth and encouraging capital investment.

However, it is not all plain sailing for the industry as falling exports and flat overall turnover are testing resilience in the sector.

AFGC CEO Tanya Barden said the report, compiled by EY, includes clear warning signs for the future of Australia’s largest manufacturing sector.

“There is no doubt Australia’s largest manufacturing sector is facing an environment where input costs are rising on everything from commodities to labour to energy, and six years of retail price deflation continues to cut margins, placing the sector under increasing pressure.

“We are expecting these pressures to only increase as energy, especially gas, has seen a doubling and in some cases a tripling of price that is likely to have dire consequence for Australian jobs and investment, with some companies reassessing their long-term future in Australia.

“While a 4.7% increase in capital investment is welcome, reversing the last three years of decline, expected increases in input costs could stall this recent turnaround in investment and employment.

“Continuing to stimulate investment in site modernisation is critical, 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,” said Barden.

The AFGC recommends that targeted investment allowances be adopted to bring forward investments in Australia, to retain jobs and businesses here, particularly in regional areas where approximately 40% of the sector’s jobs are located.

“The ability to realise premium prices for value-added food and beverage products in growing export markets is a key source of future growth and contrasts with the low growth, deflationary domestic trading environment,” said Barden.

“While at first glance a 15.4% decline in the real value of food, beverage and grocery exports is alarming, this decline appears driven by price and cyclical events. In nominal terms, exports have increased by 3.6%, which is still below recent strong export growth trends and below where Australia should be, given our trading advantages into key markets of China, Japan and Korea.

“This a healthy reminder to redouble efforts to maximise the hard-fought gains of free trade agreements and attack the rising costs of manufacturing,” said Barden.

Key facts from the State of the Industry 2017 report on the food, beverage and grocery sector, using the most up-to-date data from the ABS and other sources:

• Industry turnover $127.4 bn, down 0.3% in real terms; 2015–16 data
• Direct employment 320,302, increase 7317 people; 2015–16 data
• Industry made up of 30,748 businesses; 2016–17 data
• Capital investment of $2.7 bn, up 4.7%; 2015–16 data
• Total international trade $67.9 bn (down 8.1%); 2016–17 data

A copy of the 2017 State of the Industry Report can found on the AFGC website.