Weld Australia says the Reserve Bank of Australia cannot demand that businesses 'step up to the plate' on productivity while delivering a fourth rate hike that makes it impossible for them to invest.
Weld Australia has hit back at the Reserve Bank of Australia following the recent decision to lift the cash rate by 0.25 percentage points to 4.6% (the fourth hike this year and the highest cash rate since November 2011) and at RBA Governor Michele Bullock's claim that Australian businesses have become "less dynamic" and must "step up to the plate" on productivity.
"You cannot lecture Australian businesses about dynamism one week and then jack up the cost of their capital the next," said Weld Australia CEO Geoff Crittenden. "The Governor wants businesses to invest in productivity, which requires new technology, automation and skills. Every fabricator in the country would love to be in a position to do this. But with the cash rate at a 15-year high, four hikes in a single year, and more flagged to come, the money to invest simply isn't there. You cannot demand that businesses step up to the plate while you're taking the bat out of their hands."
According to the Australian Bureau of Statistics, headline inflation climbed to 4% in the year to August, up from 3.5%, but underlying inflation, which strips out volatile items, remained steady at 3.6%. The ABS attributed much of the increase to higher petrol prices, alongside housing costs up 5.7% on the back of rising construction costs.
"Look at what is actually driving inflation: petrol and construction costs," Crittenden said. "Neither of those is caused by a welding workshop in Western Sydney or a fabricator in regional Queensland. Yet it is those businesses-and their owners and their workers with mortgages-who are being punished with every hike. Higher interest rates will not produce one extra litre of petrol or build one extra house. What they will do is strangle the investment in technology, training and capacity that actually lifts productivity."
The blame for productivity lies elsewhere
Crittenden said that if the Reserve Bank wants to find the cause of Australia's productivity malaise, it should look at government procurement, not at the businesses being squeezed by it.
"The Governor says businesses have become less dynamic over the past decade. Let me tell her what has actually happened over the past decade," Crittenden said. "State governments have sent billions of dollars of fabrication work offshore in pursuit of the cheapest upfront price. The multinational primes and head contractors clip the ticket either way. And the hardworking Australian tradespeople at the bottom of the chain get consistently screwed over, no matter who they vote for."
"Here is the bitter irony: when that cheap imported fabricated steel arrives non-compliant, it is Australian welders who repair it, re-weld it and rebuild it. Our members are doing less and less manufacturing. Instead, they are doing the rework. If a project should take 1,000 labour hours but consumes 5,000 because imported product fails to meet Australian Standards, that is recorded as economic activity, but it adds no value. It is inefficiency forced onto compliant Australian businesses, and it is dragging down the very productivity numbers the Governor is lecturing us about."
In Weld Australia's February open letter to the Treasurer, the organisation warned that Australia's productivity growth is at its lowest level in 60 years, that manufacturing's share of GDP has fallen to a record low of 5.1 per cent, and that construction output per worker has fallen 25.4%-from $196,800 in 2018 to $180,100 in 2023-despite more people working in the industry.
"We told the Treasurer in February: this is not a labour problem, it is a systems problem," Crittenden said. "Rework masquerading as productivity. Procurement that rewards the lowest upfront price. Rules without a referee. Fix those, and productivity will follow. Blame business while bleeding it dry, and it won't."
No money to invest, and no incentive either
Crittenden said the rate hikes compound an already hostile investment environment for manufacturers, including ongoing uncertainty around research and development incentives.
"Every hike makes the business case for a new robot, a new laser cutter or a new apprentice harder to stack up. At the same time, the R&D tax incentive settings that are supposed to encourage innovation have been wound back and tangled in complexity," Crittenden said. "So borrowing costs more, investing returns less, and the work keeps going offshore. What exactly is an Australian manufacturer meant to do? The RBA and the Government cannot have it both ways: you either create the conditions for investment, or you stop complaining about the lack of it."
Crittenden said Weld Australia's message to the Reserve Bank and governments at every level was simple.
"Australian manufacturers are among the most resilient, inventive and hardworking businesses in this country. They have survived energy price shocks, skills shortages, a flood of cheap imports and now the sharpest rate-hiking cycle in a generation," he said. "They do not need a lecture from Martin Place. They need cheaper capital, fair procurement, enforced standards and a government that buys what they make. Give them that, and they will deliver all the productivity this country needs."
About us:
Weld Australia represents the welding profession in Australia. Its members are made up of individual welding professionals and companies of all sizes. Weld Australia members are involved almost every facet of Australian industry and make a significant contribution to the nation's economy. The primary goal of Weld Australia is to ensure that the Australian welding industry remains locally and globally competitive, both now and into the future. Weld Australia is the Australian representative member of the International Institute of Welding (IIW).
