Australian manufacturing has slumped again, sparking fears that any tax hikes in the federal government’s budget could put more pressure on the industry.
New figures show the Australian Industry Group’s Performance of Manufacturing index fell to its lowest level since July 2013.
AiG chief executive Innes Willox said the strong Australian dollar had put pressure on local manufacturing and conditions could worsen if the government hiked taxes in the budget.
“The sharp fall in manufacturing activity in April highlights the ongoing weakness in the sector and the parts of the economy that are linked with manufacturing,” he said.
“The softness in manufacturing also highlights the risks facing the broader economy and bolsters the risks of a contractionary budget that further slows activity by raising taxes or excessively cutting back on public sector demand.”
The index dropped 3.1 points to 44.8 in April – below the 50 level that separates expansion from contraction.
Ben Eade, executive director of the industry’s peak body Manufacturing Australia, said the industry was facing “a perfect storm of challenges”.
He said anything in the budget that would add to the cumulative cost of doing business in Australia would be a big cause for concern.
“We’ve got a high Australian dollar, high and rising input costs including labour and energy costs and the burden of regulation, at a time when we’re also seeing declining terms of trade,” Mr Eade said.
“We’re in an environment where manufacturers are penalised by the cumulative costs of doing business in Australia and we ought to be trying to get governments out of our businesses, not further into them.”
CommSec chief economist Craig James said the figures could be volatile from month to month and were probably complicated in April by the Easter and Anzac Day holidays.