Trade deficit in furniture to slow

SMALL businesses that produce domestic furniture will be increasingly vulnerable to imports, but larger commercial-furniture makers face a better future, according to a study.
Imports will continue to surge, but at a slower rate, while exports will grow steadily but off a low base, says the study, prepared by consultants for the Furnishing Industry Association of Australia (Vic/Tas).


This trend will not cut the huge trade deficit in furniture products, which will still worsen but more slowly than in the past.
“The industry balance will continue to inexorably shift from the domestic-furniture sector to the commercial-furniture sector,” says the study, which investigated manufacturing trends in the industry in the seven years to 2004-05, with a forecast to 2016-10.
“The overall outlook is probably more optimistic than that predicted by many industry commentators.”
Revenue from furniture manufacturing will grow at a compound rate of less than 3 per cent, with industry turnover hit by a subdued, cyclical housing market. This will be offset by solid growth in non-residential building.
The study says the number of furniture companies would contract slightly as the least efficient went to the wall and bigger companies rationalised their plants.
There will be modest jobs growth but most will be part-time or casual.
Both domestic- and commercial-furniture production has been affected by imports, particularly from China.
However, commercial manufacturers are less vulnerable because most of their output is made to specific orders.
“By contrast, most residential furniture is sold off the showroom floor,” the study says. Residential-furniture makers most exposed to imports are those in the mid-range (10 to 49 employees).
“Smaller (often family-based) manufacturers can often continue to trade albeit with reduced turnover and profitability,” the study says.
Imports in 2004-05 were valued at $1.8 billion, having grown at a compound rate of 14 per cent in the previous seven years, making up 21 per cent of domestic sales.
In contrast, exports in 2004-05 were valued at $150 million, with a compound growth of 2.5 per cent.
“Little growth has been made in this area in spite of recognition by the industry that exports growth is vital to the long-term health of the industry,” the study says.
“The industry is characterised by small-scale firms lacking the necessary management skills and financial resources to carry out long-term export and other development strategies.”
In the seven years to 2004-05, furniture manufacturing benefited from the decade of sustained economic growth, with revenue increasing by 6.3 per cent — still well below imports growth — to $6.8 billion.
The number of furniture factories grew by 0.9 per cent to 3651, with jobs growing at the same rate, giving furniture manufacturing a total of 43,673 employees. Victoria constituted 31.6 per cent of the total.