(Corrects NAB executive's last name in 8th, 16th and 21st
By Swati Pandey
SYDNEY Oct 10 For autoparts maker Brian Hughes,
the shock of Australia's car industry closing down could have
meant the end of his business. Instead, he reconfigured his
facility to make machinery for the booming food and building
sectors while bolstering exports.
He's not alone. As Toyota Industries Corp, General
Motors Co, Ford Motor Co and others shutter car
manufacturing in Australia, one in every two auto suppliers in
Victoria - the country's auto hub - are reinventing themselves.
This agility is what the Reserve Bank of Australia (RBA)
says is helping the economy's long-awaited transition away from
mining. The RBA is counting on a stronger pick-up in private
investment after cutting its cash rate twice this year to a
record low of 1.50 percent.
On Friday, the last Australian-made six-cylinder Ford Falcon
rolled off an assembly line, marking the end of the famed car
maker's 91-year history of car-making in the country.
"The closure to us meant we had to go out and find a new
approach. We ramped up capacity to supply to the confectionery
industry and we also invested in the building industry," said
Hughes, managing director of Composite Materials Engineering Pty
Ltd (CME), near Melbourne, the capital of Victoria.
CME, which makes body panels for cars, is among 64 of the
137 suppliers in Victoria that have either already diversified
or are in the process of reshaping their business models,
according to analysis by the Victorian government.
Official data shows business investment in the country fell
5.4 percent to A$28.71 billion ($21.6 billion) in the June
quarter. Yet spending on equipment, plant and machinery rose 2.8
percent, with the non-mining sector driving the growth. New
investment in manufacturing climbed 13 percent even as mining
dived 16 percent.
"The data is really aligning with what I've been hearing
from our customers recently," said Angela Mentis, chief customer
officer, National Australia Bank, the country's No.1
"I know some caution remains but optimism in innovation is
really gaining momentum and it's really translating into
CME is now exporting about 30 percent of its produce,
compared with 12 percent three years ago, Hughes said, supported
by the Australian dollar's fall from its mining-boom peaks of
above parity with the U.S. dollar.
ADAPT AND GROW
A global slump in commodity prices has depressed growth in
resource-rich Australia's economy to below-par levels over the
past four years.
Without the drag from weak business investment in the year
to March, Australia's A$1.6 trillion economy would have expanded
at a breakneck pace of 5 percent.
Still, at 3.3 percent the economic growth rate in the year
to June was more than enough to cap a quarter of a century
without a recession.
New RBA governor Philip Lowe said recently Australia was
adjusting "reasonably well" to the unwinding of the biggest
mining investment boom in more than a century.
"This is a significant achievement," he said.
NAB's Mentis pointed to higher investments by farmers who
are adopting digital technology to improve productivity.
Investment by Australian dairy and broadacre farms picked up
in mid-2012, with annual capital expenditure on technology and
to develop land and other resources exceeding A$2 billion.
To be sure, car makers are not completely abandoning
Ford will retain its Asia-Pacific product development centre
in Victoria as it invests A$300 million annually. Holden will
also keep its design studio in the state.
The end of car making in Victoria is estimated to hit 6,500
jobs. Even so, the broad manufacturing sector added 14,600
workers over the twelve months to August in Victoria alone with
investments in transport and areas like defence and new energy,
official data shows.
"Outside of mining there are pockets of the economy doing
very well. That is turning up in confidence and condition,"
Not far from CME, Bass River Dairies, a dairy farm of
200-odd cows in Australia's south east coast, is investing in
new machinery to boost bottling and cheese-making capacity.
"The drop in milk prices has been devastating," said Kaye
Courtney, cheese artisan at Bass, which launched a 7-day cafe at
its 230-acre (93 hectares) farm last year.
"But, we are trying to add value and build the other side of
(Reporting by Swati Pandey; Editing by Shri Navaratnam)