Food and grocery manufacturing costs increased by more than 18 per cent between 2008-2010 in Australia and are heavily impacting the industry’s profitability, growth and ability to innovate and create jobs, according to a competitiveness study by KPMG published in AFGC’s recent State of the Industry 2011 report.

AFGC chief executive Kate Carnell said the main reasons for Australian food and grocery’s high manufacturing costs included the rising cost of labour, electricity, water, land transport and government taxes and charges.

“The high Australian dollar is also making imported products cheaper, making it even harder for Australian-made brands we know and trust to compete on Australian supermarket shelves,” Carnell said.

“Compounding the problem, major retailers Coles and Woolworths are significantly increasing their private label brands and devoting more shelf-space to these products which are increasingly being sourced offshore due to lower production costs.”

The AFGC report indicated that the cost of wages in Australia is the third highest behind Germany and Japan and Australia has the second highest transport costs behind Mexico

Also, recently, AFGC’s 2020: Industry at a Crossroads highlighted that failing to improve skills development, provide tax incentives for investment or create a level playing field in the highly-concentrated retail sector could result in up to 130,000 jobs being lost by 2020.

Carnell said to prevent job cuts and maintain industry’s competitiveness, AFGC has urged all levels of government to take immediate action.

“Government needs to provide tax incentives to enable business to take advantage of the high Australian dollar to invest in large-scale plant equipment upgrades to improve efficiency.  To ensure a fairer trading environment, the Government should appoint a Supermarket Ombudsman, who would enforce a Fair Trading Code of Conduct,” she said.

“Consumers must be confident about buying affordable food and grocery brands they know and trust.  I urge all political leaders to seriously consider necessary reforms and re-assess the current business-as-usual approach towards the sector.

“And remember to buy brands that are made in Australia as you will be supporting jobs and families.”