Business Environment Profiles - Australia
Published: 05 August 2024
Industrial production
100 Index
-0.5 %
This report analyses the total value of industrial production in Australia. This includes manufacturing; electricity, gas, water and waste services; and mining excluding exploration and mining support services. The data for this report is sourced from the Australian Bureau of Statistics and is an index with a base year of 2021-22.
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IBISWorld forecasts the industrial production index to slump by 0.8% in 2024-25, to 99.7 index points. This decline is expected to be led by a decrease in mining production. Downward pressure will be placed on the production of Australia's mining sector in 2024-25 as export prices for Aluminium, Iron Ore, Gold, and Nickel are expected to fall. In addition, households are increasingly feeling the impact of high utility prices during the cost-of-living crisis, which is driving a drop in demand for electricity, gas, water and waste (EGWW) in 2024-25. High interest rates aimed at targeting inflation are increasing the cost of borrowing and restricting business activity, which is expected to slow output in the manufacturing sector. Ongoing import competition is also expected to limit manufacturing output in 2024-25, contributing to an expected decline in industrial production over the year.
Manufacturing production volumes have stayed relatively stable over the past decade, despite facing fierce import competition, high operating costs and restrictive labour laws. Many domestic producers have found it difficult to overcome the comparative cost advantages of overseas producers. Over the past five years, Australian manufacturing production has risen. Production declines from foreign markets in import-affected industries have driven up demand for domestically manufactured goods, while greater health consciousness and premiumisation trends have boosted demand for local food products.
Long-run growth in Australia's industrial production has been largely driven by the growth in mining output and rising demand for Australian commodities over the past decade. While the value of mining production has surged on the back of volatile price movements, output has stagnated over the past five years, partly because of labour shortages and mining shutdowns, placing downwards pressure on industrial production. Volatility in raw material prices can be detrimental to mining output. When the price plummets after reaching its peak, mining firms usually cut back production. This trend is expected to contribute a decline in mining output in 2024-25. More recently, increasing demand for EGWW services has driven growth in industrial production, with output from the sector expected to grow significantly over the five years through 2024-25. Overall, IBISWorld forecasts the industrial production index to decrease at a compound annual rate of 0.5% over the five years through 2024-25.
IBISWorld forecasts the industrial production index to reach 100.9 index points in 2025-26, an in...
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