The impact of Australia’s booming manufacturing sector is on track to be bigger than previously thought, with the country poised to post a growth rate of 2.5 per cent over the next five years.
The Reserve Bank of Australia, which is forecasting the country will post a 2.7 per cent growth rate this financial year, says the manufacturing sector will account for 20 per cent of the growth in Australia’s economy.
“It is also important to note that the growth of the manufacturing industry will be greater than the growth within the labour force,” the RBA’s chief economist, Andrew Haldane, said in a report to the Senate.
“Manufacturing is the main driver of Australia being able to maintain its AAA credit rating.”
The RBA also says manufacturing will create more than 13,000 jobs, and the impact on GDP will be $3.4 trillion, or $20.5 billion more than forecast.
While the manufacturing expansion is already strong, the RBC expects the sector will be even more significant in the coming years, with annual GDP growth of more than 5 per cent.
The RBS expects the manufacturing impact to be $2.2 trillion by 2026.
It says the sector is likely to grow at a faster rate than the labour market, and is forecast to generate $3 trillion in additional jobs.
The impact on employment is also projected to be much higher than previously predicted.
The report says the unemployment rate will fall from 12.3 per cent in 2019 to 7.9 per cent by 2031.
The unemployment rate was also forecast to fall by 0.1 percentage points in 2019.
The ABS also projects a 0.4 per cent drop in the unemployment-to-population ratio from 2019 to 2021.
“The impact of this forecast is projected to add about $2 billion to the $4 trillion forecast in the RBS’s economic forecast,” the ABS said.
The government is now expecting the manufacturing job creation to increase by 2 per cent a year over the medium term, with an annual growth rate up to 2.1 per cent from 2021 to 2031, with a higher-than-expected annual growth of 1.9 percent in 2032.
“While the government is working to close the wage gap, we also want to ensure that our manufacturing industry continues to create high-quality jobs for Australians,” Mr Haldan said.