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Manufacturing Industry Is Melbourne’s Iron Ore

Manufacturing Industry Is Melbourne’s Iron Ore
March 21, 2016 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley


Greater-Melbourne has a strong, blue-collar, manufacturing sector which employs 197,705 people; this is 21.9% of Australia’s entire manufacturing sector. A further 84,600 Melbourne jobs are in Transport and Warehousing, and one would argue that these are heavily reliant on manufacturing.

Manufacturing is to Melbourne what coal is to Brisbane and iron ore is to Perth.

After decades of government-funded life support, in May 2013 Ford was the first to announce its factory closure from October 2016. Within less than twelve months, Holden and Toyota had also announced closures of their factories in 2017.

In April 2014, the University of Adelaide (UOA) released a report titled ‘Closing The Motor Vehicle Industry: The Impact on Australia’ The brief given to these academics was to analyse the direct and indirect impact of closing Australia’s car manufacturing plants. The report states that “Australia is expected to suffer a fall in national employment of around 200,000 as a result of the planned closure to motor vehicle manufacturing between now (mid-2014) and 2017. The greatest impact in terms of projected jobs loss will be in Victoria, with an estimated decline of close to 100,000 jobs. Victoria’s Gross Regional Product (GRP) is also forecast to decline by $13 billion per year.”

Very few people would appreciate the potential impact of car manufacturing closures on Melbourne’s property market again. Then again, very few people understand the complexities of property markets at the best of times. Studying the science of property markets is Propertyology’s core business so we are constantly reviewing economies with a view to forecasting market performance a few years ahead.

Specific to car manufacturing, the UOA anticipates up to 98,000 Greater-Melbourne job losses directly and indirectly from car plant closures. This equates to 6.2% of all Melbourne households!

The UOA has categorised these job numbers in to individual local government authorities (LGAs) based on ‘place of employment’ and ‘place of residency’. Propertyology has further extrapolated these numbers to the percentage of households affected as shown in this graphic.

98,000 jobs equates to more than five per cent (5%) of the City’s total workforce. It’s only a few years ago when 1.5% of Brisbane’s workforce lost their job when the state government made 14,000 public servants redundant and the impact on consumer sentiment hampered Brisbane’s property market.

Big events like this affect the mood of an entire city as extended family and friends express their concern for those that they know who have been directly affected.

There is a stark resemblance between Melbourne’s current fundamentals and those of Perth’s in 2014. Between 2013 and 2014, tens of thousands of Western Australian employment contracts came to an end as the mining construction boom wound down. Insufficient replacement employment became a footpath for interstate migrants to follow. Propertyology correctly forecast the resultant easing of demand in Perth and rising housing supply that left the legacy of a five per cent (5%) decline in Perth property values during 2015 – we feel more of the same is likely in 2016.