24/01 Manufacturing industry turns to Reserve Bank
THE Reserve Bank is under renewed pressure to slash interest rates as Australia's manufacturing industry reels from a fresh round of job cuts.
Seizing on Toyota's move to cull 350 jobs yesterday, business and industry groups indicated the strong Australian dollar was inflicting agony on the nation's manufacturers.
It came amid growing expectations that inflation figures due tomorrow would be "benign", allowing the Reserve Bank to cut rates in a move that would make the currency less appealing to foreign speculators.
HSBC chief economist Paul Bloxham said the car industry was caught in a seismic change in Australia's economy, with services growing but manufacturing employment steadily falling - by 44,000 last year.
"Not everyone can win from the mining boom and we are seeing the results as the dollar climbs above historic levels," Mr Bloxham said.
"Price signals in the economy are telling us where best to apply our talent. That is in intellectual capital and research and design."
National Australia Bank economist Alan Oster said Australian manufacturers, saddled with high labour costs, could not compete with offshore manufacturers.
And European countries - such as Gemany - that specialised in high-tech automotive production were getting a cheap ride on the backs of the weaker eurozone nations, which were undermining the euro's value.
The Aussie dollar was yesterday again trading higher against the euro, at a near-record 81.3 euro cents.
The Australian Chamber of Commerce and Industry said there was more the Gillard Government could do to help the beleaguered auto industry, starting with reforming its carbon tax.
The tax would put a crippling burden on car manufacturers through high power prices, the group said.
"The Government has to do all it can to reduce the cost pressures on industry, by withdrawing the carbon tax and other green policy impediments to help lower energy costs," said chief economist Greg Evans.
The Federation of Automotive Product Manufacturers said continued government funding was necessary, but Toyota's job losses - following similarly deep cuts over the past year in the auto, steel, clothing and food processing sectors - showed component makers could no longer solely rely on the three main local car makers.
Chief Richard Reilly said the industry's future was exporting high value-added components into other nations and diversifying into industries such as marine, defence and biotech.