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Australian Chamber–Westpac

Survey of Industrial Trends


Australian Chamber of Commerce and Industry & Westpac Banking Corporation

227th report June 2018 (survey conducted 9 May to 4 June 2018)

n The Australian Chamber–Westpac Survey of Industrial trends, Australia's longest running business survey
dating from 1966, provides a timely update on manufacturing and insights into economy–wide trends.

n The Westpac–AusChamber Actual Composite index lifted in June 2018, up to 63.8 from 59.4 in March.
The rise in June broke two quarters of moderation from 65.7 in September which was preceded by a
sustained uptrend that emerged in June 2016 when the index was at 54.8.

n Th above par reading for the Composite index reflects strength in new orders, output, overtime and
backlog. However, employment consolidated in June after the hiring burst in the second half of 2017.

n Manufacturing is benefitting from: a strong upswing in public infrastructure investment with state
governments continuing to add new projects to the pipeline, as well as solid non–residential business
construction and a relatively low Australian dollar combined with an above par pace of global growth.
Against this are negatives relating to moderate consumer spending constrained by low wage growth
and continuing intensity from offshore competition. The homebuilding upswing is also fading from high
levels as the housing market cools.

n The uptrend in exports has continued at a moderate pace after stumbling back in 2016. The speed of
expansion slowed in June as global growth begun the year on a softer note following 2017's uplift. A
net 3% of firms report an increase in export deliveries in June. Export expectations in June are similarly
positive but are also down slightly from March.

n Expectations are positive, centred on new orders, output, backlog, overtime as well as renewed
expansion in employment. The Expected Composite rose to 66.8 in June from 61.0 in March which takes
the index back above the mid–2017 peak of 64.9. A net 37% expect the general business situation to
improve over the next six months, continuing the upbeat mood.

n Equipment investment intentions of respondents have been positive over recent years in response to
rising demand. This is consistent with rising profitability and high levels of capacity utilisation. A net
22% of firms intend to increase equipment investment over the next year. Building intentions are solid, a
net 7% of firms expect to increase investment, up from a net 3% in March.

n The survey's Labour Market Composite, which broadly tracks economy–wide jobs, is at 55.1. The index
correctly foreshadowed the acceleration in employment through 2017 and identified the turning point
to softer momentum in early 2018. The current positive level of the index suggests employment growth
will pick–up to a solid pace over the remainder of 2018 but remain short of 2017's outsized expansion.
Contents
Key survey results 4

The business cycle & economic outlook 5

Activity & orders 6

Investment & profitability 7

The labour market 8

Prices & inflation 9

Other results 10

Summary of survey results 11

The Survey of Industrial Trends produced by the Australian Chamber of Commerce and Industry & Westpac Banking
Corporation is a quarterly publication.

Enquiries
Economics, Westpac Banking Corporation, Ph (61–2) 8254 8720
Eugene Bajkowski, Consulting Economist, Australian Chamber of Commerce and Industry,
Ph (61–2) 6249 6128 or (61–2) 6273 2311

Editors
Simon Murray, Economist, Westpac Banking Corporation
Andrew Hanlan, Senior Economist, Westpac Banking Corporation
Eugene Bajkowski, Consulting Economist, Australian Chamber of Commerce and Industry
Miranda Herron, Senior Consultant, Australian Chamber of Commerce and Industry

Email: economics@westpac.com.au

Net response or "balance" is calculated by the proportion of "ups" less "downs" on individual questions, thereby yielding
the net balance. A positive balance indicates a net upward or improving trend and a minus balance a net downward or
deteriorating trend.

The 227th consecutive survey was closed on 4 June 2018.

A total of 271 responses were received, and provided a reasonable cross–section of Australian manufacturing in respect of
industry groups and size of operation.

The next survey will be conducted over August/September 2018.

3
June 2018

Key survey results

Westpac–AusChamber Composites
 
 z { |   } ~     } 
    €  
y ; : : ;

(seasonally adjusted)
 ‚ ‚
 ƒ „ … †  ‡  ˆ ‰  „

Q1 2018 Q2 2018 Š
‹  Œ "  ‹  Œ " 

 

Actual – composite index 59.4 63.8


Expected – composite index 61.0 66.8    

• The Westpac-AusChamber Actual Composite Index A A

bounced to 63.8 in June from 59.4 in March. This


 

follows softening in the past two quarters from


September's top of 65.7.    

• The Composite is back to a well above average level @


K I F L H ] Ž  G D I F D X @

with output, new orders, overtime and backlog all


seeing strength. However, employment softened after c d e f g h i j k e i l f m n o m p q r m s t h f u v h i l w m g

a hiring burst through the second half of 2017.


   

                    

                  

• Public infrastructure investment is boosting demand


in the manufacturing sector which is also supported
by solid non-mining business investment and a
relatively low AUD.
• The Expected Composite rose to 66.8 from 61.0
suggesting the rebound has further to play out.
 <  
=  
  <     >  ?
9 : ; : : : : : ;

Westpac–AusChamber Labour Market Composite


Q1 2018 Q2 2018 A
!  " # ! B  

 

Net balance 52.9 55.1


c d e f g h i j k e i l f m n o m p q r m s t h f u

v h i l w m g u k x c

 

• The survey provides insights into economy wide




A A

employment growth. This highlights the key linkages


between manufacturing and the labour market. A




• The Westpac-AusChamber Labour Market Composite 


A

increased to 55.1 from 52.9.


 

• The index correctly led the uplift in employment in


C D E F G H I J K L E M N H O P D Q R H P S L Q T H Q U D F M S O G S E V F D W

 

H X Y Z [ F Q E \ ] N E ^

@ A

2017. Official data report that employment growth K I F L H ] D O G ] S _ O D ` F a Q S b F N [ F Q H Y a \ Q N E ^

was a brisk 3.2% in 2017. @

  

                    

• Similarly, the plateau and turn lower in the index


                  

led 2018's employment slowdown. The current four


month annualised pace to April is just 1.3%.
• The stabilisation in the Composite points to
employment growth improving to a solid pace but
well short of what we saw in 2017.

             
 


General business situation           

Q1 2018 Q2 2018 !  " # !  " #

   

Net balance 38 37
   

• Manufacturing firms are positive on the business    

environment. In June, a virtually unchanged net


37% of respondents expect the general business    

environment to improve over the next six months.  

The upbeat outlook is consistent with results in March      

and over 2017.


     

• The June survey took place post the May Federal


Budget and manufacturers' continued optimism
     

$ % & ' ( ) * + , & * - ' . / 0 . 1 2 3 . 4 5 ) ' 6 7 ) * - 8 . (

suggests this year's policy reinforced the mood.      

                    

                  

• Growth in many advanced economies slowed in


the first quarter of 2018 following the uplift in 2017.
However, it would appear that continued state
infrastructure investment at home has offset the
diminishing external demand and kept domestic
sentiment elevated.

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that
the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties.
The results ultimately achieved may differ substantially from these forecasts.
4
June 2018

The business cycle & economic outlook

Manufacturing & the business cycle


   !  " # $ %  & ' # ( ) * + %  ) + + " , " - )

. / 0 1 2 3 4 5 6 7 0 8 9 3 : ; / < 8 = : 2 = 0 > 1 / ? 9 = 7 0 / 9 = @ A A / : 3 B A

• The Westpac-AusChamber Actual Composite Index U V N N Q N R S T

has a solid track record of predicting near-term K

W X Y Z [ \ X ] ^ ^ [ _ ` a ^ b ] \ Z c

domestic economic conditions, identifying turning


D
H

points in the cycle.


d e f Y ` ] g X _ h X Z i f [ b j \ Z c

G D

• Recently manufacturing has been mainly supported


by activity outside of the household sector.
F

D D

• The major development boosting manufacturing is C

F D

increased public infrastructure investment. Other


contributing drivers are solid non-mining business J

E D

investment as well as a relatively low AUD and above


average world growth. C
k l m n o p q r s m q t n u v w u x y z u { | p n } ~ p q t  u o } s € k

C D

• Official data confirms that manufacturing is


L M N C L M N G L M N J J L M N J F L M N J K L M N C L M N G

I O I O I I I I P I P

expanding. The national accounts showed


manufacturing output increased by 2.4% in the March
quarter. That followed 2017 marking the first year of
annual manufacturing growth since 2011.

Australian & World manufacturing surveys


ý
“ Ÿ – — ‘ þ ˜ ‘ ’ ÿ  — þ   ‘ ’ “ ” ‘ • – “ — ˜ ’ ™ Ÿ “ — ž š  Ÿ

 £ ¦ ¢  ­ ®  ° ¨ ¦   ­
£ © ¯ ¥
­ ¯    ¤ ¡ ³ £  £ ¦

• Global and Australian manufacturing cycles tend to  ½  Ê   ½  Ê 

be synchronised, particularly at major turning points.


 

· ·

è é ê ë ì í î ï ð ê î ñ ë ò ó ô ò õ ö ÷ ò ø ù í ë ú û í î ñ ü ò ì ú  ò ë  ô ñ ú    é ë  ò õ ö ÷ ò î í

• Historically, the Westpac-AusChamber Actual ¿ · ¿ ·

Composite had moved broadly in line with global


manufacturing conditions.
¶ · ¶ ·

• However, since 2014, the Composite has deviated


to the upside. In part this reflects Australian ¹ · ¹ ·

outperformance as easier monetary policy led to


an upswing in homebuilding, but it also reflects the º · º ·

transitional effect of exiting firms. More recently, a Ý Ï Ò Î Þ Ø ß Ü Ô Õ Ò Ö × Ø Ù Ú Ï Û Ö Ñ Ù Þ Ñ Ò Ð Î Ï     á Ñ Ú Ø á   Ì

public infrastructure upswing is boosting activity.


µ · µ ·

• Global manufacturing expanded in 2017 in line with


» ¼ ½ » ¼ ½ » ¼ ½ » ¼ ½


´ · º ´ · ´ ¸ ¸ ´ ¸ ¶

the uplift in world growth. Activity has slowed in


2018 and conditions have diverged across countries.
Europe and Asia are falling back from the previous
jump while the US is gaining momentum on the back
of expansionary fiscal policy.

Manufacturing & business investment


 ‘ ’ “ ” ‘ • – “ — ˜ ’ ™ š › “ ˜ œ  š ’ – ˜ ’ ž š Ÿ –  š ’ –

  ¡ ¢ £ ¡ ¢ ¤ ¥ ¡ ¦ § ¦ ¨ © ª £ « ¬ ª ¦ ­ ® ¢ ¨ ­ ¯ ¦ § ° ± ² ³ ­ ¢ ­ ¬

• The AusChamber-Westpac survey has a solid track Á ½ Ê Ë


Á Â Ã Ä Å Æ Ç È É Ä

record of predicting equipment investment from the ¹ ·

è é ê ë ì í î ï ð ê î ñ ë ò ó ô ò õ ö ÷ ò ø ù í ë ú û í î ñ ü ò ì
µ ¶

manufacturing sector. º ·
µ ·

¸ ¶

• Manufacturing firms are expecting to invest over the µ ·

next year. A net 22% of respondents are intending to


¸ ·

¸ ·

increase plant and equipment investment in the next


twelve months.
· ·

´ ¶

• The ABS capex survey confirms that manufacturing


´ ¸ ·

´ ¸ ·

investment is expanding. The 2017/18 financial year ´ µ ·

´ ¸ ¶

is shaping up strongly with real manufacturing ´ º ·


Ì Í Î Ï Í Î Ð Ñ Í Ò Ó Ô Õ Ò Ö × Ø Ù Ú Ï Û Ü Ý Ï Ò Î Þ Ø ß à á × Ò â

equipment investment up 4.5% in the year to the


´ µ ·

Ô ß Î Õ Ø á Ó Ô ã ä ß Ø Þ Ï å Ò Õ Û æ Ï ç à Û × Ò â

March quarter 2018. This follows a softer 2016/17 and


´ ¹ · ´ µ ¶

» ¼ ½ » ¼ ½ » ¼ ½ » ¼ ½ » ¼ ½ » ¼ ½ » ¼ ½

´ ¾ µ ´ ¾ ¿ ´ · · ´ · ¹ ´ · À ´ ¸ µ ´ ¸ ¿

a strong uplift in 2015/16.

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure
that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and
uncertainties. The results ultimately achieved may differ substantially from these forecasts.
5
June 2018

Activity & orders

Output
 ‚ ƒ „ ‚ ƒ … † ‡ ˆ ƒ ‰

(seasonally adjusted)
Š ‹ Œ  Ž   ‘ ’ “ ‘ ‹ Œ ‘ ”

Q1 2018 Q2 2018   œ ¡ ¢   œ ¡ ¢

– — – —

Actual – net balance 31 40 ® ¯ ° ± ² ³ ´ µ ¶ ° ´ · ± ¸ ¹ º ¸ » ¼ ½ ¸ ¾ ¿ ³ ± À Á ³ ´ · Â ¸ ²

Expected – net balance 30 40


˜ — ˜ —

• Manufacturing output has now expanded for sixteen ™ — ™ —

consecutive quarters. A net 40% of respondents


reported higher output in June.
— —

• The uptrend emerged in 2014 and gradually picked • ™ — • ™ —

up momentum. After a modest dip in the last few £ ¤ ¥ ¦ § ¨ © ª « ¬ ¤ ¥ ¬ ­

quarters, the June rebound has re-established the • ˜ — • ˜ —

expansionary trend. Ã Ä Å Ã Æ Ç Å È È É Å Ê Ë Ì Ã Í Ä Ê

• – — • – —

• Expectations mirrored the move in actual output. In


š › œ š › œ š › œ š › œ š › œ š › œ š › œ

•  ™ •  – • — — • — ˜ • — ž • Ÿ ™ • Ÿ –

June, a net 40% of firms expect output to increase in


the next three months.

New orders
ˆ ‡ † Ð † Ñ
Î Ï Ï

(seasonally adjusted)
Š ‹ Œ  Ž   ‘ ’ “ ‘ ‹ Œ ‘ ”

Q1 2018 Q2 2018   œ ¡ ¢   œ ¡ ¢

– — – —

Actual – net balance 21 37


Ò Ó Ô Õ Ö × Ø Ù Ú Ô Ø Û Õ Ü Ý Þ Ü ß à á Ü â ã × Õ ä å × Ø Û æ Ü Ö

Expected – net balance 32 49


˜ — ˜ —

• Increasing new orders are behind the expansion in ™ — ™ —

manufacturing output. In June, a net 37% of firms


indicated an increase in new orders. — —

• The expectations sub-index previously held up in the • ™ — • ™ —

March survey which suggested that the dip in output


in the quarter would be short-lived. • ˜ —

£ ¤ ¥ ¦ § ¨ © ª « ¬ ¤ ¥ ¬ ­
• ˜ —

ç è é ç ê ë é ì ì í é î ï ð ç ñ è î

• In the June survey, a net 49% of respondents • – — • – —

anticipate that new orders will increase in the next


š › œ š › œ š › œ š › œ š › œ š › œ š › œ

•  ™ •  – • — — • — ˜ • — ž • Ÿ ™ • Ÿ –

three months. This indicates that activity has resumed


its uptrend and momentum should continue into the
second half of the year.
• Public infrastructure investment is strong and with
state governments continuing to add new projects to
the pipeline, new orders are expanding.

Exports
ò ó „ ‡ † ƒ Ð Ï ô õ ö Ï † õ Ï Ñ

Š ‹ Œ  Ž   ‘ ’ “ ‘ ‹ Œ ‘ ”

Q1 2018 Q2 2018   œ ¡ ¢   œ ¡ ¢

˜ — ˜ —

Actual – net balance 8 3


Expected – net balance 6 5
™ — ™ —

• Exports increased at a slower pace in June than


March and the average over 2017. A net 3% of firms
reported that exports rose in June. — —

• That is consistent with some slowing in global


growth in 2018 after 2017's synchronised uplift. • ™ —

£ ¤ ¥ ¦ § ¨ © ª « ¬ ¤ ¥ ¬ ­
• ™ —

Correspondingly, the Australian dollar has depreciated


in the last few months providing some offset from the Ò Ó Ô Õ Ö × Ø Ù Ú Ô Ø Û Õ Ü Ý Þ Ü ß à á Ü â ã × Õ ä å × Ø Û æ Ü Ö

slowing in overall demand.


• ˜ — • ˜ —

š › œ š › œ š › œ š › œ š › œ š › œ š › œ

•  ™ •  – • — — • — ˜ • — ž • Ÿ ™ • Ÿ –

• Expectations show a net 5% of respondents seeing


higher exports in the next three months.

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that
the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties.
The results ultimately achieved may differ substantially from these forecasts.
6
June 2018

Investment & profitability

Investment intentions
 2 3 ü 4 3  ü û  ü 3  ü û  
1

5 6 7 8 8 9 6 : ; 6 < = > 8 ? @

Q1 2018 Q2 2018      

   

    ! " # $  " %  & ' ( & ) * + & , - !  . / ! " % 0 &

Plant & Equipment – net balance 10 22


Building – net balance 3 7    

• The survey, as it has since late 2014, indicates


that manufacturing firms are intending to increase
 

investment in response to rising demand and


consistent with upbeat business sentiment.      

• In June, a net 22% of respondents report that they   


A     B  C  D E F   

  

are planning to increase equipment investment over G  D   D  H I

the next twelve months. This is well up on March's


net 10% and is back to levels seen around 2015-16.
     

                

• Building investment intentions also tracked higher,


a net 7% of respondents seeing increased building
in the next twelve months compared to a net 3% in
March.

Capacity utilisation
÷ ø ù ø ú û ü ý þ ü û ÿ û ø ü û  

Q1 2018 Q2 2018   
  

Net balance –5 -2  
    ! " # $  " %  & ' ( & ) * + & , - !  . / ! " % 0 &

 

• Capacity utilisation has maintained an elevated level


following the uplift seen from late 2013 to late 2015.
 

• The number of firms operating above normal capacity      

was less than the number of firms below normal


capacity by a net 2%. Three quarters are at normal      

capacity levels. This is broadly in line with the reports


over the last few years.
          

     

• A net 16% of firms indicate that the single factor      

that is limiting their ability to increase production


 

 

  

  

  

 

 

is capacity. That figure was the same in the March


survey. Strong demand and capacity pressures
are likely to continue to be a support for higher
equipment investment.

Profit expectations
 L û ü 3 M ù 3 ú ü ø ü û  
J K

5 6 7 8 8 9 6 : ; 6 < = > 8 ? @

Q1 2018 Q2 2018      

   

Net balance 16 26
   

• Manufacturing firms expectations on profitability


rebounded in June, consistent with the bounce in    

output and new orders.    

• A net 26% of respondents are anticipating that  

profitability will rise over the next twelve months.


That is up from March's net 16% and back to being in      

line with December's net 28%.


     

• Official data confirms that profitability has improved.     ! " # $  " %  & ' ( & ) * + & , - !  . / ! " % 0 &

The ABS business indicators survey shows that


     

                

manufacturing gross operating profits rose 9.6% in


the year to March 2018.

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure
that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and
uncertainties. The results ultimately achieved may differ substantially from these forecasts.
7
June 2018

The labour market

Numbers employed
¤ ™ › —  š £  › ¥ ¦ ˜ §  ¨

(seasonally adjusted)
© ª « ¬ ­ ® ¯ ° ± ² ° ª « ° ³

Q1 2018 Q2 2018 Y W ´ µ Y W ´ µ

Actual – net balance 1 -3


s t u v w x y z { u y | v } ~  } €  ‚ } ƒ „ x v … † x y | ‡ } w

O N O N

Expected – net balance –6 7


• The survey indicates that manufacturing employment
N N

softened in the June quarter as indicated by the


March survey's negative expectations reading. A T
O N

T
O N

net 3% of firms reported that they decreased their


workforce in June. P N P N

T T

¶ ] ` ^ f _ · ¸ r k ] ` k d

• This is the first decline in actual employment since


June 2016. Output cooled in the first quarter of 2018 Q N
¹ º » ¹ ¼ ½ » ¾ ¾ ¿ » À Á Â ¹ Ã º À

Q N

and potentially led to more cautious hiring activity.


T T

U V W O U V W Q U V W N N U V W N P U V W N R U V W S O U V W S Q

T X T X T T T T T

The moderation also follows the burst in hiring seen


in late 2017 and suggests that the uplift may have
been a little over done.
• Expectations suggest that the reduction in the
workforce will not last long. A net 7% of firms expect
to expand hiring in the next three months ahead.

Overtime worked
Ä Å
 š ž Ÿ ›  Æ ˜ š œ  ¨

(seasonally adjusted)
© ª « ¬ ­ ® ¯ ° ± ² ° ª « ° ³

Q1 2018 Q2 2018 Y W ´ µ Y W ´ µ

Actual – net balance 9 37


s t u v w x y z { u y | v } ~  } €  ‚ } ƒ „ x v … † x y | ‡ } w

P N P N

Expected – net balance 20 43


O N O N

• Overtime worked jumped sharply in June after a


steep decline in March. A net 37% of firms indicated N N

that they increased overtime in June.


O N O N

• That brings it back to the elevated levels seen over


T T

the past few years with an increased use of overtime P N P N

present since late 2012.


T T

¶ ] ` ^ f _ · ¸ r k ] ` k d

¹ º » ¹ ¼ ½ » ¾ ¾ ¿ » À Á Â ¹ Ã º À

• The lift in output in June was behind the need for


Q N Q N

T T

longer overtime. A net 43% of respondents expect


U V W O U V W Q U V W N N U V W N P U V W N R U V W S O U V W S Q

T X T X T T T T T

to increase overtime in the next three months


despite the similarly driven expectations for a larger
workforce.

Difficulty of finding labour (seasonally adjusted)


• – — ˜ ™ š › – š œ  ž ž Ÿ   ¡ ž ¢  £ £

Q1 2018 Q2 2018 R N
Y Y

S O

Net balance 10 2
s t u v w x y z { u y | v } ~  } €  ‚ } ƒ „ x v …

† x y | ‡ } w … ˆ ‰ { … { ‰ s

Q N

’ } „ t u v z x } y  x v | t “  € ”

S N

• The survey provides insights into the tone of the T


P N

overall labour market. Firms' views on the difficulty O N


R

of finding labour broadly tracks shifts in the T

unemployment rate for the Australian economy. N Q

• A net 2% of firms report that labour was harder to


O N

find in June, down from a net 10% in March. This P N

brings the survey measure back into line with results


Š ‹ Œ

Z [ \ \ [ ] ^ _ ` a b \ \ [ c d [ c e _ f g b ^ h i [ c j k h ` k d l _ m n o

 Ž   ‘

Q N

seen over the previous few years. p c k q r _ b a q k c ` h f ` k l h m n o

R N N

• Official ABS data indicates that progress on U V W

T X
O U V W

T X
Q U V W

T
N N U V W

T
N P U V W

T
N R U V W

T
S O U V W

T
S Q

reducing the unemployment rate has stalled after


some tightening seen earlier. In April 2018, the
unemployment rate is 5.6% with moves in the
participation rate having tended to mirror changes in
employment over the past year.

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that
the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties.
The results ultimately achieved may differ substantially from these forecasts.
8
June 2018

Prices & inflation

Average unit costs


Ç È É Ê Ë Ì É Í Î Ï Ð Ñ Ò Ó Ð Ó

Ô Õ Ö × Ø Ù Ú Û Ü Ý Û Õ Ö Û Þ

Q1 2018 Q2 2018 ê æ ë ì ê æ ë ì

Actual – net balance 12 32


ø ù ú û ü ý þ ÿ ú þ  û          ý û
ý þ   ü

ã ã

á á

Expected – net balance 13 15


à á à á

• In 2016, and in particular the first half of 2017, input


cost escalation was a concern for firms. This follows a â á â á

period of subdued cost rises.


á á

• The issue has re-emerged in June with a net 32% of


respondents indicating that unit costs have increased. ß â á
í î ï ð ñ ò ó ô õ ö î ï ö ÷
ß â á

• While the previous period centred on a spike in


electricity costs, on this occasion, increases relate to ß à

ä
á

å æ ä å æ ã ä å æ ä å æ ä å æ ä å æ ä å æ ã
ß à á

a rally in oil and base metal prices.


ß ç â ß ç ß á á ß á à ß á è ß é â ß é

• That is not to mention that electricity costs remain


elevated and resolving the issue is likely to take time.

Average selling prices


Ë Î Í  Ë Ñ Ð Í Ê Ï Î Ì Í  Ó Ð Ê É Ë   Ê Ï Ñ É  Ê É Ó Ó Í Ê É Ó

Q1 2018 Q2 2018 ã
ê æ ë ì ê  æ æ

á é â

Actual – net balance 10 5


 ö ò ò    õ   î ö   ñ î ï ð ñ ò  ò   

 í     ñ  ð  ñ î ï ð      ð ï õ ð ï õ   î ö  ö ô ö  ö       

Expected – net balance 12 7 à á è

• Price increases have become more prominent since


mid 2013, in contrast to the lack of pricing power
â á à

which was the norm prior to 2008.


á á

• However, despite the rise in input costs, a net 5% of


firms increased prices in June down from a net 10% ß â á ß à

in March. Expectations are also lower with a net 7%


of respondents anticipating to increase prices in the ø ù ú û ü ý þ ÿ ú þ  û          ý û
ý þ   ü
! ø

next three months compared to a net 12% in March.


ß à á ß è

ä å æ ä å æ ã ä å æ ä å æ ä å æ ä å æ ä å æ ã

ß ç â ß ç ß á á ß á à ß á è ß é â ß é

• This suggests that in the current circumstance, firms


are price takers. It may be that rising volumes have
allowed firms to withstand some margin pressure.

Manufacturing wages
Ë Î Í  Ë Ñ Ð Í Ê Ï Î Ì 8 Ë Ì É Ì Ê Ò 8 Ð 9

Q1 2018 Q2 2018 ê æ ë ì
ê  æ æ

à á

Net balance 18 26
 ñ  ð  ñ î ï ð     $ ñ  ö %   î ö &  ÷ ö ô     

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• The survey indicates that manufacturing wages will


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increase in the year ahead. In June, a net 26% of


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firms expect that their next wage bill will deliver an é á

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• While survey measures have differed from the data ß é á


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reported by the ABS over the past few years, official ß â á

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• The latest wage price index update indicated that


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momentum eased off but the AusChamber-Westpac


survey result suggests that the nascent uptrend
should reassert itself (although potentially at a
gradual pace).

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure
that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and
uncertainties. The results ultimately achieved may differ substantially from these forecasts.
9
June 2018

Other results

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Factors limiting production


      

      

              

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6 7 8 9 : ; < = > 8 < ? 9 @ A B @ C D E @ F G ; 9 H I ; < ? J @ :


 

Q4 2017 Q1 2018 Q2 2018


Orders (%) 57 47 58
 
Capacity (%) 20 16 16
Labour (%) 3 3 4
Finance (%) 2 4 3
     

Materials (%) 2 3 0
+ , - . / 0 1 2 3 4 , - 4 5

Other (%) 12 21 8
     

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 % 
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 % &
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 % '
None (%) 4 6 11

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that
the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties.
The results ultimately achieved may differ substantially from these forecasts.
10
June 2018

Summary of results (not seasonally adjusted)

1. Do you consider that the general business situation in Australia will improve, remain the same, or deteriorate in the next six
months?
Net balance Improve Same Deteriorate
37 39 59 2

2. At what level of capacity utilisation are you working?

Net balance Above Normal Normal Below Normal


–2 12 74 14

3. What single factor is most limiting your ability to increase production?

None 11 Orders 58
Material 0 Finance 3
Labour 4 Capacity 16
Other 8

4. Do you find it is now harder, easier, or the same as it was three months ago to get:

Net balance Harder Same Easier


(a) labour? 2 5 92 3
(b) finance? –2 4 90 6

5. Do you expect your company’s capital expenditure during the next twelve month to be greater, the same, or less
than the past year:

Net balance Greater Same Less


(a) on buildings? 7 14 79 7
(b) on plant & machinery? 22 29 64 7

Excluding normal seasonal changes, what has been your company’s experience over the past three months & what changes do
you expect during the next three months in respect of:

Change in position in the last 3 Expected change during the next 3


months months
Net
Improve Same Down Net balance Improve Same Down
balance
6. Numbers employed –2 5 88 7 6 12 82 6
7. Overtime worked 35 45 45 10 40 47 46 7
8. All new orders received 34 48 38 14 46 54 38 8
9. Orders accepted but not yet delivered 19 29 61 10 20 31 58 11
10. Output 38 46 46 8 37 50 37 13
11. Average costs per unit of output 32 37 58 5 15 19 77 4
12. Average selling prices 5 8 89 3 7 14 79 7
13. Export deliveries 3 6 91 3 5 6 93 1
14. Stock of raw materials 2 10 82 8 –6 4 86 10
15. Stocks of finished goods –2 8 82 10 4 12 80 8

11
June 2018

Summary of results (not seasonally adjusted)

16. Over the next twelve months do you expect your firm’s profitability to:

(a) Improve? 37
(b) Remain unchanged? 52
(c) Decline? 11
Net balance 26

17. Do you expect your firm’s next wage enterprise deal will produce annual rises which vis–a–vis the previous deal are:

(a) Greater? 32
(b) Same? 62
(c) Less? 6
Net balance 26

A. Industry profile of survey:


(% of respondents)
Food, beverages, tobacco 15
Textiles, fabrics, floor coverings, felt, canvas, rope 6
Clothing, footwear 7
Wood, wood products, furniture 2
Paper, paper products, printing 8
Chemicals, paints, pharmaceuticals, soaps, cosmetics petroleum & coal products 10
Non–metallic mineral products: glass, pottery, cement bricks 4
Basic metal products: processing, smelting, refining, pipes & tubes 2
Fabricated metal products: structural & sheet metal, coating & finishing, wire, springs, hand tools 15
Transport equipment: motor vehicles & parts, excluding repairs, rail, ships, aircraft, including repairs 5
Other machinery & equipment: electrical, industrial scientific, photographic 18
Miscellaneous: including manufacturers of leather, plastic & rubber, sporting equipment, jewellery 8

B. How many employees are covered by this return?


1–100 101–200 201–1000 Over 1000
54 10 14 22

C. In which state is the main production to which this return relates?


WA SA VIC NSW/ACT QLD TAS

10 9 18 48 11 4

The Westpac–AusChamber Composite Indices


The Westpac–AusChamber Actual and Expected Composite indices are weighted averages of the activity measures in the
survey. The weights are as follows: employment 20%; new orders 30%; output 25%; orders accepted but not delivered 15%;
overtime 10%.
The Westpac-AusChamber Labour Market Composite is a function of actual employment, with a weight of almost 50%, as
well as: expected employment; expected overtime; new orders; order backlog; and expected order backlog.

This issue was finalised on 7 June 2018


Publication enquiries, Economics, Telephone (61–2) 8254 8720, economics@westpac.com.au

12
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