The effects of inflation for Australian Manufacturing
Manufacturing plays a vital part in the Australian economy, employing over 850,000 people and accounting for around 6% of our GDP (Gross Domestic Product). However, inflationary pressures threaten the long-term sustainability of key sectors in the manufacturing industry.
Supply Chain Issues
One key issue has been supply chain vulnerabilities. Right now, over 60% of Australian manufacturers are reporting delays in sourcing many of their essential materials. We're talking about steel, aluminium, plastics, and other resources without which work stops. Further contributing to this problem is the increase in transport costs such as freight and fuel.
Labour Shortages and Skills Gaps
We are seeing issues with skills gaps in other Australian industries like hospitality and agriculture - manufacturing is no different. The struggle to find adequate employees, particularly those with high-level digital skills, has put pressure on productivity
In turn, the labour shortage has also contributed to a wage crunch, requiring manufacturers to pay more to compete for talent. This has been felt at its worst in regional areas, where enticing labour away from big cities has proven to be quite the challenge.
Rising Energy Costs
Manufacturing is one of the most energy-intensive industries that we have in Australia. So it should come as no surprise to hear that the widespread increase in the price of energy has been strongly felt by manufacturers. This has led to price rises in the cost of manufactured goods to offset some of these energy costs - which has further contributed to rising inflation levels.
Interest Rate Increases
Recent interest rate hikes have added to the financial strain on manufacturers. This isn't so much the outright interest rates that have caused this, but more the continual rise in rates since the all-time record low rates seen since 2020.
With all of that said, manufacturing saw a 4.1% increase in real output growth. In the context of all of the challenges the industry is facing, this is very positive indeed.
How Can Manufacturers Adapt?
If you've made it this far, you're no doubt wondering how manufacturers can ease these financial pressures. One of the biggest pressures facing manufacturing is the price of energy, which also makes it one of the best areas to make savings. Here's how it can be done.
Commercial Solar
In a period where the price of basically everything is going up, commercial solar is one of the few areas that has been steadily getting cheaper for businesses to implement. With government rebates and tax incentives available, the initial investment is far less daunting than it once was. Plus, solar helps businesses lock in lower energy costs, insulating them from future price hikes while supporting their sustainability goals.
We even offer specific solar options for manufacturing businesses. This is something that our client, MIRRAT, took full advantage of. After installing a 45kW solar energy system, they're on track to save over $400,000 on their energy bills!
Energy Procurement
One area that can really take the pressure off manufacturing energy bills is to look into commercial energy procurement. By analysing your business's energy usage patterns, our procurement specialists negotiate contracts that secure the best possible rates for your business. For manufacturers, this means avoiding the trap of overpaying for electricity or gas you don't use - something that is all too common.
For larger manufacturers or those in regional areas, group tenders are another savvy option. By pooling your demand with other businesses, you gain access to wholesale rates usually reserved for the biggest players. But this isn't a service reserved only for commercial energy requirements, we offer energy procurement for small businesses too.
Flexible contracts and ongoing monitoring also ensure you stay on top of market trends, so you're never stuck in a deal that no longer makes sense.
Efficiency Upgrades
Efficiency upgrades are one of the quickest ways manufacturers can cut energy costs without major overhauls. We can start with a free energy assessment to uncover inefficiencies, like machinery running during downtime or unnecessary peak-hour energy use.
This ties into another key strategy - demand management. By shifting energy-heavy processes to off-peak hours, you can significantly reduce your bills. Network tariff optimisation is equally important, ensuring you're not paying for capacity you don't need.
Most businesses don't actually need to make major overhauls in order to realise big energy savings. In many cases, it's the small, targeted changes that deliver the most value.
At Choice Energy, we detangle the web of energy rates, laying it all out so that you know if you're getting a great deal or not - and if not, how you can get a better one. If you're ready to reduce the financial pressures of energy bills for your organisation, contact Choice Energy for a free energy assessment today.
