Australia’s manufacturing sector has been hammered by the COVID-19 pandemic, declining by 5.7 percent over 2020-21, according to Los Angelesbased market research firm IBISWorld, which recently said the knitted product manufacturing industry, however, has bucked this trend to achieve a revenue of USD 90.6 million—a 13.2 percent rise—over the same period.

Global supply shortages and tariff reductions have opened up new doors for clothing manufacturers in Australia, it said.

 

‘Australian knitted product manufacturing has been in long-term decline, with revenue contracting at an annualised 5.6 percent over the five years through 2020-21. However, export revenue has increased by 37.1 percent during the COVID-19 pandemic, providing a lifeline to Australian businesses,’ said IBISWorld senior industry analyst Ross Dean.

 

The country’s apparel retail industry contracted by 8.5 percent in 2019-20, amid a collapse in consumer sentiment. However, the outbreak also had an unexpected benefit for Australian clothing manufacturers. The pandemic disrupted supply across North Asia, which typically accounts for close to 40 percent of the global apparel manufacturing industry.

 

“The loss of supply from Asia left the global economy looking for other sources of clothing, supporting demand for Australia’s clothing manufacturers. For example, Australian exports of knitted apparel to Japan jumped by more than 320 percent in 2019-20, and exports across the men’s and boys’ wear manufacturing industry increased by 33.9 percent,” said Dean in a company press release.

 

The drop in China’s output was only temporary, but it has expanded export opportunities for Australia’s clothing manufacturers, especially with recent tariff reductions on apparel exports to New Zealand.

 

“While domestic demand is projected to continue declining, exports of knitted garments are forecast to grow by an annualised 1.8 percent over the five years through 2025-26,” he said.

 

A vital driver of this growth is expected to be recent changes to tariffs on knitted apparel and other clothing items to New Zealand. Under free trade agreements with the Association of Southeast Asian Nations (ASEAN) and New Zealand, the tariff on knitted items like jerseys and pullovers dropped from 10 percent in January 2019 to nil in January 2020. Further tariff reductions through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership are expected by January 2024.

 

“The temporary disruption of Asian clothing manufacturers provided Australian firms with a short window to expand their foothold in export markets. Australian firms may be able to leverage greater brand awareness and declining tariffs to drive growth in export revenue,’ explained Dean.

 

New Zealand is the primary export market for Australia, with an estimated 34.7 percent of knitted product exports going across the Tasman in 2020- 21. For an industry in long-term decline, this market is providing a rare and much needed opportunity for Australian clothing manufacturers.

 

“Australian clothing manufacturers will likely place greater focus on the New Zealand market in the future. However, the rapid pace of export growth seen in 2020 will not likely be sustainable,” added Dean.

 

One factor that will likely work against Australian clothing manufacturers is the forecast appreciation in the Australian dollar.

 

The number of apparel manufacturers in Australia has fallen by more than half over the past decade, as firms have either moved operations offshore to countries with cheaper labor costs or simply exited the industry. Those that remain have survived by focusing on supplying premium products to niche or overseas markets.

 

Source: fiber2fashion.com