The trade deficit of Australia’s $108 billion food and grocery manufacturing industry almost doubled over the past year, reflecting the intense economic pressures facing the sector, according to a new report by the Australian Food and Grocery Council (AFGC) and KPMG.
The Report found the industry’s international net trade deficit ballooned by 48.5 percent from $1.8 billion in 2009-10 to $2.7 billion in 2010-11.
Officially launched today by Federal Agriculture Minister Senator Joe Ludwig in Canberra, the third annual economic snapshot of the food and grocery manufacturing industry State of the Industry 2011 confirmed last year’s findings that industry remained Australia’s largest manufacturing sector, employing more than 312,000 people, compared with 288,000 last year. Industry’s total annual turn-over also grew by more than 4 percent to $108 billion.
AFGC Chief Executive Kate Carnell said the State of the Industry 2011 findings showed organic increases in both turnover and jobs, despite very difficult and challenging times.
"This result shows industry has strong potential for growth in the future if there is bold reform of the current national policy settings to allow industry to continue to invest, innovate and create jobs," said Ms Carnell, who joined Senator Ludwig to launch the report during AFGC’s Industry ‘Tasting Showcase’ at Parliament House.
"Outside mining, food and grocery is the jewel in the crown of Australian manufacturing."
The detailed State of the Industry 2011 report – examining fresh and processed food, beverage and grocery sectors – showed the complex industry was made up of 30,104 businesses in 2010-11 (124 fewer than 2009-10), spent $368 million on R&D and accounted for $46.6 billion of international trade (imports plus exports).
The food, beverage and grocery sectors paid wages and salaries of $13.56 billion in 2008-09, an increase of approximately 2 percent from 2007-08.
KPMG’s lead partner for the food and beverage segment Mark Epper said the industry has continued to face competitive challenges and increased input prices, but there were also opportunities to differentiate, especially through innovation and renovation.
"The competitive market landscape has put pressure on Australian producers and manufacturers. Increased input prices have been difficult to pass on to retailers and coupled with this we have seen strong growth in imports partly due to the rise in the Australian dollar," Mr Epper said.
However, Mr Epper said cheaper imports should not be the only solution to reduce costs as there is a real opportunity for investment in products and processes in Australia.
"The food and grocery manufacturing industry has the opportunity to improve its competitive standing through innovation and efficiency by taking advantage of new R&D tax incentives and grants relevant to the industry. This could mean improving or developing new products, initiatives in process and supply chain improvement, new system integration or energy efficiency and other sustainable initiatives."
To address the industry’s challenges, Ms Carnell called on the Federal Government to fast-track its National Food Plan and Food Processing Industry Innovation Strategy: “Australia needs a thriving and profitable food and grocery industry to provide a wide range of safe, nutritious, sustainable, clean and affordable products for Australia and the world.
"This will only occur if appropriate policy settings are established to encourage investment in innovation, jobs and growth."
The 2011 report was based on the following definition of the Australian food and grocery manufacturing industry:
"Those industries that value-add to agriculture, food and other products for the purpose of producing everyday fresh and processed food, beverages and grocery products consumed and used by Australians."