However, businesses are still hindered by shortage of skills, labour, and outdated equipment
Industry expects production output and financial performance to lift in 2024, while labour shortages and competitive pressures weigh on productivity and growth, a new CommBank report has shown.
Its new Manufacturing and Supply Chain Insights report reveals that 61% of manufacturing, wholesale trade, and distribution businesses in Australia expect a moderate or significant increase in production levels over the next year. Only 6% predict a decrease, with the remainder holding steady.
In Western Australia and Queensland, 71% and 67% of businesses, respectively, anticipate increased production. Victoria and South Australia both showed forecasts of 58%, while New South Wales was at 54%.
According to the CommBank report, businesses are also expecting revenue and profit growth, in line with rising output. This optimism is reflected by 83% of respondents expressing confidence in conditions over the next 12 months.
However, businesses face persistent challenges. Respondents identified cost-related factors, driven by energy prices (80%), inflation (74%), and interest rates (72%), as the highest-impact issues this year.
Around two in three also cited changing customer preferences as a significant factor for 2024. Last year’s top shifts in customer behaviour included expectations for lower prices (32%) and faster delivery (31%).
Maria Christina, national head of manufacturing and wholesale trade at Commonwealth Bank, stated that although increased costs and customer expectations have heightened the focus on productivity, businesses are hindered by a shortage of skills and labour, as well as outdated equipment.
“While manufacturers and distributors have been tested by economic uncertainty and labour shortages, most report healthy capacity utilisation rates – which measures the percentage of potential output that is being realised,” Christina said. “In fact, more than half say utilisation is running above 85%, which is a testament to the resilience and innovation of Australian manufacturers.
“To grow capacity in step with expected demand in 2024, businesses are doubling down on investment in technology and equipment, and upskilling employees. These initiatives help optimise operations and the workforce in pursuit of productivity.
“The government’s newly announced Future Made in Australia Act will seek to support the efforts already underway. This could also help the domestic sector respond as many downstream customers gravitate to local or regional suppliers.”
With a focus on improving productivity, 81% of businesses plan to increase technology investment in the next 12 months. Emerging technologies set to impact the industry most include those enabling supply chain efficiencies and artificial intelligence (AI) and machine learning.
The potential benefits of AI are widely recognised, with two in three businesses saying it improves demand forecasting, inventory management, and supply chain sustainability. However, 62% face integration challenges, and 60 % say a lack of skills hampers full utilisation of AI.
Many manufacturers and distributors are also advancing their sustainability efforts, with almost two in three having initiated sustainability programs. Around 37% have adopted renewable energy or on-site generation, with another 43 % planning to follow. If these plans materialise, the current average proportion of renewables in the energy supply mix, now at 33%, will further increase.
What are your thoughts on the findings of CommBank’s Manufacturing and Supply Chain Insights report? Comment below.
