An industry that many had written off is now hiring faster than any other in Australia

  • Just under two years ago Australian employment was growing at an annual pace of under 1%. Now its growing at 2.5%.
  • The acceleration in hiring has been lead by Australia’s manufacturing sector with employment surging by 86,000 over the past 12 months.
  • Australia’s private sector has taken over as the main driver of employment growth, helping to offset declines in government sectors.

In late 2016, Australian employment growth was weak, increasing at an annual pace of just 107,000, or 0.9%.

However, fast forward nearly two years and the story is looking very different. According to the Australian Bureau of Statistics (ABS), employment rose by 306,000 in the year to August, representing an increase of 2.5%.

While not as fast as the 3.6% annual pace seen in January this year, it’s still a decent clip, and enough to send Australia’s unemployment rate to the lowest level since late 2013.

So which sectors have driven the recent acceleration in hiring?

This chart from Macquarie Bank has the somewhat startling answer: Australia’s manufacturing sector.


Following the release of detailed labour force data from the ABS on Thursday, employment growth among manufacturers surged by 86,000 over the past 12 months. Along with a similar increase in employment in public administration over the same period, it meant that just two sectors accounted for 56% of total employment growth over the past year.

The pickup in hiring across the manufacturing sector corresponds with recent strength in the Ai Group’s Australian Performance of Manufacturing Index (PMI) with activity levels improving at the fastest pace on record in March this year.

Strong gains of 65,000, 36,000, 33,000 and 30,000 were also recorded in hiring among professional services, finance and insurance, mining and construction workers respectively.

Digging deeper into the data, Macquarie uncovered another clear trend in hiring — it’s been entirely driven by Australia’s private sector, offsetting job losses in government sectors.

“[This] is in stark contrast to the pattern from 18 months ago,” says Justin Fabo and Ric Deverell, economists at Macquarie, pointing to the chart below.


More Broadly, Macquarie says much of strength in hiring over the past 12 months has been in goods-related industries, something it puts down to stronger global economic growth, a lower Australian dollar and spillover effects from public infrastructure investment domestically.

Along with helping to boost employment in Australia, Macquarie estimates that a sustained 10% depreciation in the Australian dollar typically boosts Australian GDP growth by a cumulative 1-1.75 percentage points (ppts) over two to three years as import demand weakens and offshore demand for Australian exports, particularly services, improves.

It also suggests that much of that cumulative benefit usually arrives in the period immediately following a decline in the currency.

With annual Australian economic growth already sitting at multi-year highs, and the Australian dollar remaining just above multi-year lows, the tailwinds for hiring in goods-related industries looks to be blowing fairly briskly at present, something that bodes well for lower unemployment and faster wage growth in the period ahead.