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Industry to rebound as resources boom disappears

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A report by think tank the Grattan Institute suggests that the country’s manufacturing sector has performed with resilience through the mining boom and
will grow as investment in resources - worth $400 billion in the last decade - tapers off.

The report, titled The mining boom: impacts and prospects, has said a recession is possible but “far from inevitable” as the ten-year surge in mining comes to an end, but trade-exposed sectors, including manufacturing and agriculture, will benefit.

Based on a survey of 16 countries whose exchange rates came down after the end of resources booms, the Grattan Institute found that, "Within three
years, manufacturing exports as a share of GDP had risen by more than a third on average."

"Therefore temporarily high exchange rates in economies comparable to Australia have not had long-lasting effects on export volumes and the added value of manufacturing.''

The industry’s decline compared to GDP had been temporarily accelerated, but the decline was not terminal.

“We found no evidence that manufacturing is hollowed out by the period of exchange rate elevation,” wrote author Jim Minifie of the study.

 “Manufacturing and other trade-exposed industries bounce back quickly to trend.”

 Andrew Dettmer of the AMWU was sceptical of the report’s conclusions, citing the car industry’s difficulties.

"The international thinking is that once manufacturing dips 5 per cent of the total economy it is fundamentally lost," Dettmer told Fairfax Media.

Image: www.news.com.au

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