TRANSCRIPT
We are talking with Innes Willox, chief executive of the National Employer Association, the Australian Industry Group. Trump's doubled down his tariff commitments. Are you concerned about the likely impacts of that on Australian industry and why?
It's becoming obvious by the day that the chances of Australia escaping the American tariff noose are reducing. It's now looking more likely than not that Australian industry across steel, aluminum and iron will be caught up in the Trump tariffs. Although the government and embassy have worked very hard we’ve not seen any walking back by the American administration about its potential impact on Australia. The bottom line here for Australian industry is that we're on the cusp of a huge change in the way that the global economy operates and we need to work through how we respond. Do we respond with tariffs of our own with quotas or do we just not respond at all and hope that it goes away? So we're going into a period of extreme economic volatility and the Trump tariffs that are about to be announced are just at the pointy end of that.
The tariffs are likely to prolong and even deepen the current insolvency cycle in Australia, and what is your view of the potential impacts for the rest of 2025?
Well, what the Trump tariffs will do is put a massive fear into the Australian economy that we will be impacted directly and also indirectly that we'll be continued to be caught up as collateral damage in a global trade war, particularly between the United States and China. But Australian businesses have increasingly used Mexico and also Canada as entry points into the American economy over recent years as a result of the free trade agreement between the three countries. So we're going to get caught up directly and indirectly in this. For Australian businesses that are already doing it tough in a flat lining economy, this volatility is the last thing that they need as they prepare for the future and try to work through what will be a very difficult 2025.
If we could turn to manufacturing first of all, how important is manufacturing to the Australian economy?
Manufacturing is a key indicator of the health of an economy because it goes to an economy's complexity, its ability to adapt to changing circumstances, to grow and adjust as necessary. Manufacturing is still the fourth biggest component sector of the Australian economy. It's 6.1 per cent of our GDP, it's just over 6 per cent of employment. It is a significant part of our economy and that's just the direct benefits. It's also the spinoffs or the spillovers from manufacturing. Think around what it does for the construction sector for transport and communications more broadly for our energy sector. Now without manufacturing then key, other components of our economy would not be as viable as they are. It's really important to maintain a strong and viable manufacturing base in Australia. So, 25 per cent or one in four dollars [spent] on research and development in Australia is spent within the manufacturing sector, although it's only 6 per cent of the economy. So that tells you that manufacturers are looking to advance, to innovate and to grow. Reports of manufacturing's death in Australia are wildly exaggerated. There are segments of the manufacturing sector that are growing very strongly. The biggest single component of manufacturing now within the Australian economy is food and food processing and that is a hugely growing sector. So, although we're seeing change within manufacturing, we're still seeing significant growth in key parts of that part of the economy.
So, yes, there's been a bit of a rebound since COVID. However, according to your report, business leaders are reporting their most pessimistic outlook actually for margins and profitability in a decade. Could you just speak to that?
Well, there's certainly a tone coming out of our survey and our work with industry more broadly that we're in a very tough time at the moment. We're in a bit of a trough. Our economy is flatlining. We're not seeing big growth in business investment, which is a key indicator of confidence. Businesses really concerned about the economic direction more generally. We're seeing very, very high levels of business insolvencies at the moment for a variety of reasons and that is impacting weighing heavily on business confidence. So overall business leaders are seeing 2025 in very much being a mirror image of 2024, a hard year, a bit of a slog and real concerns around how businesses are going to be able to drive key areas of growth like productivity, which is crucial for a business's success. What businesses are looking for are government policies, federal and state that enable them to grow, to employ, to compete, and to innovate. And they're not seeing that at the moment. They're seeing a significant growth of the public sector, but the private sector is doing it very tough. Big challenges for 2025 are lingering inflation, high interest rates, high energy costs, concerns about energy reliability, and still ongoing concerns around labour and skill shortages. This is as our economy tries to adapt to the challenges of the net zero economy, advances in technology, businesses is struggling to find the workforce that it needs to allow it to grow.
You've said that industry leaders are likely to take certain actions in 2025 and some of those are scaling back on long-term investments in favor of short-term productivity measures. Could you just elaborate what you mean by that?
Businesses looking at 2025 as a year really of belt tightening in many ways. A back to basics approach that business is looking at overall, there are reduced plans around investment, around spending on R and D. It's around practical developments that businesses are looking at to bolster productivity and to get them through these tough times. They're wary of overspending and overcapitalizing at the moment. It's really a year where businesses looking to consolidate rather than grow.
We all know there's an election looming before May 17 what should government be looking at? What can they do to make business more competitive?
Well, business is concerned that more of the same will mean more of the same. It will mean tough conditions for a long time to come and concerns that business won't be able to grow. Now businesses looking at government, whoever it is after the election, to implement policies that enable businesses to grow andemploy people, to upskill people to become more competitive and to innovate. There are real concerns around policies like where certainty around energy policy, around the overall strength of the economy, building consumer confidence and resilience. Workplace relations is very difficult area for business at the moment to navigate a lot of uncertainty there. So there's a lot that businesses worried about and is hoping that governments can focus on. So, if whoever is elected focused on some of the key enablers for business, business would see that as a positive thing. Deregulation, tax reform where possible, energy certainty, putting downward pressure on energy supplies, making sure that workplaces are able to be adaptable and flexible where they need to be with the appropriate balances in place. We are operating in a high-taxing environment, a high-cost environment, an environment of increasing regulation and uncertainty around what was one of our core strengths in energy. All of that is weighing on industry at the moment.
One more final question - is made in Australia still a selling point offshore, and if so, why? So do we still have the cachet for quality and durability that we've always had, or is it something that we've got to work harder on?
Well, we can't be complacent that made in Australia is going to just get us in the front door and to sell our products, we have to work hard to do it. The global trading system that we knew is breaking down around us, so we are going to have to find new markets and new products, new ways to build supply chains and to build our national resilience. Yes, made in Australia is still important symbolically for the country we're still seeing particularly as clean and green. That's a big bonus. It's still seen as producing high quality product on time and being reliable trading partners and reliable investors. But the world is changing very quickly. So, we have to adapt and we have to adapt very quickly to what is changing to ensure that we do find the new markets and the new products that we need and that we are able to compete. We just can't sit back and expect that the world will come to us. We have to go out and find it and create the new markets and one in four Australian jobs relies on trade. We are a trading nation and we have to be able to compete in a rapidly changing trading world.
Thank you so much. Thank you very much for your time.
