As many economically developed countries experience at one point or another, the manufacturing industry in Australia is in troubled waters.
What has previously been a strong sector, allowing for a huge number of jobs and good prospects in terms of profit, the industry is in decline – and it is happening quickly.
This was highlighted in Australian Industry Group’s Performance of Manufacturing Index report. For the third successive month, the index remained below the 50-point mark (which signals contraction) tumbling by 3.6 points to 45.4 last month.
This puts the spotlight on the importance of business insurance, for any organisations sailing the volatile seas of commerce in Australia. The changes that are happening and the factors that are affecting manufacturing, however, are quite unique.
While many Australian industries are growing through a close relationship with foreign markets, manufacturing is being crippled by it.
Other Asia-Pacific-based factories are able to exist with a lower operating cost, which is allowing them to undercut Australian-manufactured goods by a significant margin.
“Every Australian maker of aluminium extrusions and finished products is struggling. All blame predatory competition from China, the world’s biggest aluminium producer,” The Sydney Morning Herald reported recently.
“They claim it is dumping product at below the cost of production, in breach of world trade rules, in order to drive Australian companies out of business and control the market.”
Meanwhile, Australian Industry Group’s Chief Executive Innes Willox suggested that the domestic market is proving difficult for many manufacturers, leaving foreign trade the most accessible avenue.
“The currency decline is absolutely helping exporters get their products overseas and to allow them to be much more competitive, but at the same time now we’re seeing the domestic economy slowing,” he said in a March 2 report by the ABC.
However, this puts certain strain on a manufacturing business. Exporting is generally more expensive than operating in your local economy, and it is certainly more volatile. With tough competition and revenues tumbling, many will rely on their manufacturing insurance to act as a safety net during difficult times.
How manufacturing insurance helps
When profits are falling and operational efficiency hangs by a thread, the slightest disruption can cause serious financial hardship, and it’s important to be protected should the worst come to pass.
A business insurance policy that guards against fire, theft and general property damage is often essential. Meanwhile, one that covers everything from machinery breakdown to issues with transport and logistics will give a manufacturing enterprise greater peace of mind in a testing period.
As an example, when competition is high and revenue lower than you would like, a product recall can become disastrous for both operational profitability and reputation.
No one sees a recall coming, and they are generally catastrophic to a budget. Cuts will likely need to be made elsewhere should your company need to perform a product recall, so insurance that covers such financial damage can be a weight off an owner’s shoulders.
MGA Insurance Brokers can help
MGA understands the manufacturing industry. Our partnership with the South East Melbourne Manufacturers’ Alliance (SEMMA) puts us on top of any changes or challenges in the sector, meaning we can help guide companies to a level of insurance that suits them.
Our goal is to provide SEMMA members with broad access to all Australian and overseas insurance markets, and deliver experienced advice with qualified and professional insurance personnel.
The type of insurance you may need to consider includes:
- Fire & perils
- Property damage
- Machinery breakdown
- Computer/electronic breakdown
- Motor vehicles
- Business interruption
- Product recall
- Public & products liability – including statutory liability
- Professional indemnity
- Tax audit
No matter what area of manufacturing you work in, call MGA Insurance Brokers and ensure your business is ready for any difficulties or successes in the future.