Regional manufacturers more optimistic than city counterparts: report

Most regional manufacturers and distributors in Australia have a more optimistic outlook than their city counterparts, a recent CommBank report has found.

According to the CBA Manufacturers and Distributors in Focus report, 89% of manufacturers and distributors headquartered in regional Australia are optimistic and the majority are also expecting an uplift in revenue (68%) and profit (67%) in the year ahead.

As a result, two in three regional manufacturers and distributors are seeking to increase output levels amid demand for local producers. A positive outlook is also supporting stronger overall technology investment among regional manufacturers and distributors. In the next 12 months, 83% plan to increase technology investment, with 52% forecasting a moderate increase and 31% forecasting a significant budget uplift.

Regional manufacturers are also setting the pace for sustainable manufacturing practices, with 60% having implemented multiple sustainability practices such as using renewable energy. On average, regional manufacturers and distributors are sourcing 41% of their total energy supply from renewable sources, ahead of metropolitan businesses at an average of 30%.

Positive sentiment is buoyed by healthy capacity utilisation rates (CUR) — the percentage of an organisation’s potential output that is being achieved. The majority (90%) of regional manufacturers report CUR at more than 75%, which includes close to 60% of regional manufacturers reporting running above 85%.

Despite positive performance metrics, regional manufacturers acknowledge that higher interest rates and energy costs are impacting the industry in 2024. Most expect fixed costs to keep rising, and labour and skills shortages are seen as the top drag on productivity.

To navigate headwinds and meet higher production targets, many regional manufacturers are directing capital expenditure towards boosting productivity in supply chain enhancements (60%), technology, software and operating systems (each 42%). Of all activities supporting productivity, reskilling is seen as the most crucial.

CommBank’s Executive General Manager Regional and Agribusiness Banking, Paul Fowler, said regional manufacturers have continued investing through the economic cycle to help build capacity and much-needed skills.

“Regional businesses have been busy adapting to changing customer expectations, including demand for higher-quality products and a preference for local suppliers,” he said. “To lift output while managing persistent talent shortages, many manufacturers and distributors are searching for new ways to drive productivity and efficiency gains.

“According to our research, regional manufacturers are demonstrating stronger productivity and higher intentions to invest in supply chain efficiencies, technology and labour when compared to their metropolitan peers.”

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