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Manufacturing slumps again

Canberra Times logo Canberra Times 1/05/2014

Manufacturing activity has slumped again, sparking warnings that any tax hikes in the government's May budget could pile more pressure on the industry.

New figures show the Australian Industry Group's Performance of Manufacturing index fell to its lowest level since July 2013.

The index dropped 3.1 points to 44.8 in April - below the 50 level that separates expansion from contraction.

AiG chief executive Innes Willox said the strong Australian dollar had put pressure on local manufacturing and if the budget raises taxes it could further slow activity in the sector.

"The sharp fall in manufacturing activity in April highlights the ongoing weakness in the sector and the parts of the economy that are linked with manufacturing," he said today.

"The softness in manufacturing also highlights the risks facing the broader economy and bolsters the risks of a contractionary budget that further slows activity by raising taxes or excessively cutting back on public sector demand."

The report said businesses were under significant margin pressure in April as selling prices continued to decline.

Respondents to the survey expressed concern about the lack of new orders and activity as well as the stronger Australian dollar, which had intensified import competition and dampened demand for locally made products.

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