Australian manufacturing is at an inflection point. The sector now contributes only a small share of national output, and output per person has shown weak growth for many years. In this context, Human Resources (HR) has a critical role in helping manufacturers lift productivity, not just cut cost.
According to ABC News, manufacturing now contributes just 5.1 per cent of Australia’s GDP, the lowest of all OECD countries (abc.net.au, 2025).
A Parliamentary report into advanced manufacturing confirms that structural change has driven down Australia’s manufacturing share (aph.gov.au, 2023).
The OECD’s latest Employment Outlook notes that unit labour costs affect competitiveness, especially when not matched by output gains (www.oecd.org, 2024).
Research from the Centre for Future Work reveals that Australia ranks last in manufacturing self sufficiency among all OECD countries and no country can be an innovation leader without a strong manufacturing base (australiainstitute.org.au, 2020).
How HR can help drive productivity in Australian manufacturing
Strategic workforce planning aligned to advanced manufacturing
HR can partner with operations, engineering and finance to map required future skills (automation, robotics, data, quality systems), identify critical roles (e.g., mechatronics technicians, maintenance planners), and develop internal talent pipelines via apprenticeships or mid-career transitions. This ensures high cost labour is deployed where it creates the greatest value.
Skills development and capability building
Manufacturing often demands multi-skilled and adaptable workers. HR can design competency frameworks linking skills to safety, quality, output and waste metrics, and collaborate with knowledge providers such as TAFEs, universities and equipment suppliers to develop and rollout training programs. This supports productivity premium wages.
Work design and employee engagement
Well designed work plus employee engagement via continuous improvement, lean processes and suggestion schemes can improve output, reduce rework and waste, and increase quality.
Frontline leadership and supervision capability
Strong supervisors ensure efficient production and guard against rework, downtime, and non-compliance. HR led leadership training can reduce avoidable cost.
Performance and reward systems aligned with productivity
Continue to adapt performance based incentives to align with future productivity metrics. Since manufacturing growth has stalled so to it seems has innovative incentive plans.
Employee relations as a productivity enabler
Enterprise bargaining with multi year wage commitments linked to flexibility, skills pathways and productivity can support competitiveness. Many Enterprise Agreements seem to lack real productivity requirements, and are close to agreements with not much more than providing new wage and benefit increases.
Data, workforce analytics, and continuous improvement
Measure workforce metrics with production outcomes to identify high performing teams and best practices can be continually developed.
Australia's manufacturing sector has experienced a long decline in its share of GDP. Labour cost remains relatively high but can be justified if value added per worker is strong. Through strategic workforce planning, capability building, performance structures and effective Employee Relations, HR can help make high-cost labour a competitive advantage.
At Linq HR, we help organisations cut through workplace complexity, transforming busyness into focused performance through tailored HR and employee relations solutions. Ph 1300134566.
Sources
ABC News 2025: https://www.abc.net.au/news/2025-08-06/the-race-to-shore-up-australias-remaining-industry/105617502
Parliamentary report 2023: - https://www.aph.gov.au/Parliamentary_Business/Committees/House/Former_Committees/Industry_Science_and_Resources/Completed_Inquiries_of_the_47th_Parliament/AdvancedManufacturing/Report/Chapter_2_-_The_Australian_and_international_landscape
Australia Institute 2020: https://australiainstitute.org.au/wp-content/uploads/2020/12/A-Fair-Share-for-Australian-Manufacturing-WEB.pdf
OECD 2024: https://www.oecd.org/content/dam/oecd/en/publications/reports/2024/06/oecd-employment-outlook-2024-country-notes_6910072b/australia_4d5a7a18/4f76e85a-en.pdf
OECD (n.d.) Unit Labour Costs: https://www.oecd.org/en/data/indicators/unit-labour-costs.html
Productivity Commission 1996: https://assets.pc.gov.au/research/supporting/changing-manufacturing/changman.pdf
