Australian Manufacturing Costs Assignment

Added on - 19 Nov 2019

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Running Head: Australian Manufacturing CostsChallenges Facing the Australian Manufacturing IndustryStudent NameInstitutional AffiliationCourse/NumberInstructor NameDue Date
Australian Manufacturing Costs2Challenges Facing the Australian Manufacturing IndustryIntroductionThe manufacturing sector’s contribution to GDP is significant and thus an importantsector to the economy (Langcake, 2017). The number of people employed in the sector aremany; considering even those employed in related industries. The output produced are sold bothin the domestic and international markets. It is therefore crucial to ensure that there is muchdevelopment in this sector. The current contribution of manufacturing industry to GDP andemployment has fallen compared to some years back (Onselen, 2014). In this research, we shalldetermine how increased production costs impact the economy and other macroeconomicindicators. The negative impacts of high manufacturing cost will raise the need for policyimplements by the government. The article “More than 2,500 jobs to go as Toyota announcesend to Altona production” obtained from the ABC News, is clearly exhibiting a situation wheremanufacturing firms in Australia are not able to stand the high production costs (Castro, 2017).This paper will show the various actions taken by the manufacturing firm in order to lower theproduction costs or rather to avoid it. Comparison of manufacturing costs in Australia and othereconomies will be done and determine the actions the government should take to ensure thatthese firms are able to continue producing the goods rather than transferring their operationsabroad. The government may find this research useful for promoting economic growth.Economic AnalysisThe cost of production determines the investment level and thus the employment level.When the cost is lower, a higher number of employees get a job but when the cost is high,employment falls as some people are laid off. The cost of production has a significant influenceon the inflation rate. The high manufacturing costs forces the producers to raise the price of thegoods produced. This is also because at high cost the manufacturers cuts their demand level thuscreating a shortage and consequently the price is increased so as to bring equilibrium betweendemand and supply.
Australian Manufacturing Costs3Fig: Australian Labor costsSource: Tradingeconomics.com (2017)The initial labor costs in Australia was lower but have gone up on a rising trend from2007 to 2016. Labor is an important input to production and thus if it’s more costly, the morecostly production becomes and thus the manufacturers are forced to cut their production. Thedemand for labor falls when the company makes a decision to lower the output production.In the article, the production cost has been a challenge for the Toyota Company for over threeyears (Castro, 2017). The company announced its decision to close its plant in Melbourne in2017; it said there was no intension of producing beyond this year (2017). There are three factorsthat Toyota Company claimed to influence its decision. One is that the Australian dollar has beenunfavorable; second is high manufacturing costs and lastly is low economies of scale.The most direct impact of high manufacturing costs is experienced in terms of highoutput price and on the unemployment level. The article has a notion that the Toyota Companyhad projected to lower its employees from 4000 to 1300 after the closure of the Melbourne plant.The closure is expected to take place on 3rdOctober 2017. This Company that has been inoperation for over 50 years is now coming to an end. Workers of this Company had beenworking under uncertainty as the actual date was not stated earlier. Now that the actual closuredate has been specified, workers have felt some relieve since they know when they are actuallygoing to leave the firm. The closure has one direct impact, the laid off workers in this sector andfrom related sectors will add up to the labor force; this raises the unemployment rate. For the
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