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NZ Furniture Manufacturers 1999 Annual Conference, Melbourne, 14 July 1999: address



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Senator The Hon Judith Troeth 

Parliamentary Secretary for 

Agriculture, Fisheries and Forestry

An address at the NZ Furniture Manufacturers 

1999 Annual Conference on 

behalf of Senator Nick Minchin

Melbourne, 14 July 1999

 

Introduction

Thank you for the opportunity to talk to you today. I’m speaking on behalf of the Minister for Industry, Science and Resources, Senator Nick Minchin, who is sorry that he can’t be here.

Thank you also Mr Orr for your kind opening remarks.

I have been asked to speak to you today about developments in the Australian Furnishing Industry .

The fact that your conference is being held in Melbourne is significant. Furnitex, the largest exhibition in Australia will begin soon and it is encouraging to see that you are here to attend this exhibition.

Your presence indicates the close and growing links between the furniture industries in each of our countries.

This includes the New Zealand and Australian Associations concerned with the furniture market.

New Zealand is by far Australia’s largest export market for furniture. In 1997-98, 30 per cent of our exported furniture went to New Zealand. - This is three times more than our furniture exports to any other country.

Imports from New Zealand are also significant, representing 7 per cent of the value of furniture imports to Australia.

In turn, Australia is also important to New Zealand’s furniture industry. Three quarters of your country’s furniture exports come to Australia

In return, Australia is easily the single largest source of supply to New Zealand. New Zealand is also an important materials supplier for Australian furniture manufacturers.

Most of your exported wood comes to Australia and a considerable amount becomes furniture, particularly your pine.

Australian Industry Developments

Today I want to touch on two areas in the Australian furnishing industry:

· the development by the Government and industry of a joint plan for future action; and

· the industry’s own initiatives to secure its future.

The Furnishing Industry Action Agenda

The Federal Government and Australia’s furnishing industry are committed to working together to develop and implement an Action Agenda.

Announced in the 1998 election policy, the action plan will assist both government and industry to prepare the framework for the industry’s future.

Action Agendas were introduced in 1997 by the Howard Government as part of the industry policy statement, Investing for Growth .

The action agendas were designed to promote cooperation between government and industry by examining trends, investigating policy options and developing strategies to identify and meet future challenges.

The Furnishing Industry Action Agenda will promote long-term, sustainable competitive advantages for the industry by identifying what actions can be taken to boost innovation, productivity and exports.

The Australian furnishing industry is a significant contributor to the nation’s economy.

In 1997/98, the industry increased its turnover on the previous year by almost 11 per cent to $7.7 billion.

Employment grew by over 9 per cent, now reaching 70,000 people, or 7.3 per cent of total manufacturing employment.

Those positive results underscore a strong industry performance. However, the situation is not perfect. Imports continue to increase. The 1997/98 figures show a slight decrease in exports.

Australian producers must improve their competitiveness just to maintain their share of the domestic market.

Our local manufacturers need to draw on their ingenuity and entrepreneurial ability and explore new ways of doing business.

Australia has many advantages. We have unique timbers. We have a skilled workforce, and we have talented designers capable of producing furnishings of international quality. These need to be harnessed.

This is no time for complacency. If nothing is done, manufacturers will find their business eroded over time. This is why the Furnishing Industry Action Agenda is important.

Through the Action Agenda, industry will set out how it intends to meet and beat the challenges of import competition and competition from other products. It will also determine if it can expand on its domestic base.

Governments can help by removing regulatory impediments and responding to educational and training needs. The process of developing the Action Agenda may identify further roles for government.

The plan for the Action Agenda for furniture is due to be devel oped by December 1999 and I am advised that it is progressing well towards this target date.

Several points seems to be clear at this time. There is a clear need for designers and manufacturers to work more closely together. There is misunderstanding of each other’s role with manufacturers suggesting designers don’t understand or care about practical design and designers suggest manufacturers want quality design on the cheap.

The potential value of networks between manufacturers has been overlooked. Manufacturers can work together to achieve economies in production by specialising in aspects of a job rather than all trying to do the whole job themselves.

The most obvious application of these networks is in exports and there are some signs of this emerging.

A more difficult area is in clusters of manufacturers. In Italy and the United States in particular, there are regions where furniture manufacture is very concentrated. Examples include Brianza in Italy and High Point in North Carolina.

This proximity seems to produce strong benefits from close competition, cooperation, better vertical relationships with suppliers, availability of skilled labour and a feeling of common destiny.

The Australian industry has not developed in cluster locations and, from the experience overseas, it seems there is little governments can or should do to assist their formation.

It is hard; however, not to see value in the concept and to look for other ways of emulating the benefits of clusters. Perhaps a ‘virtual cluster’ is a possibility.

Competition from imports is strongest at the low value end of the market, particularly where the proportion of labour is high.

For example, there are relatively few wooden chairs manufactured in Australia now, as wooden chairs have a high labour content. The future seems to lie in emphasising value rather than price. This will need to be achieved by improving the perception and reality of quality and encouraging consumers to demand that quality. It is a major challenge.

In the context of Action Agendas, I would also like to mention the Government’s initiatives in the field of encouraging the management of firms’ chains of supply.

The 1999 Budget provided more than $3 million for a program to encourage innovation, boost competitiveness and further develop export markets.

The program fulfils the Government's commitment to build durable partnerships between industry and government to overcome barriers to growth.

The program, entitled the Value Chain Management Program, builds on the achievements and resources of the previous Supply Chain Partnerships Program and the Business Networks Program by adopting a whole-of-industry approach to pursuing market opportunities in Australia and overseas.

It will assist companies with similar skills to link with their customers and suppliers in order to build sustainable, long-term partnerships.

The program could, for example, link several building and construction companies to work together on projects to streamline purchasing of goods and services, as well as combining architectural and financial services.

This will increase their competitiveness to Australian and overseas clients.

An outstanding example of the previous Supply Chain Partnership Program was provided by a furniture company in South Australia by Marshall’s furniture.

Marshall’s recognised that its future depended on forging long-term relationships with its suppliers and its major retail customers.

The program facilitated that task by supporting the use of specialised consultants to do:

  • detailed supply chain mapping;
  • market research of its major retailer’s perceptions of Marshalls;
  • investigating forecasting, planning and scheduling processes;
  • investigating inventory, management and transport issues;
  • developing an improved supply chain process; and
  • p roject management.

I trust that the success of the previous program will be repeated with the new Value Chain Management Program and expect that furniture companies will seek to participate in it.

Industry initiatives

There are several areas where the industry has taken the initiative to enhance its future.

These initiatives are separate from the Action Agenda, but show how the Australian Furnishing Industry is pro-active in meeting the challenges of global competition.

Two months ago, the Furnishing Industry Association of Australia launched the Furnishing Quality Program .

The Furnishing Quality Program aims to improve the quality of furniture sold to the Australian consumer and to promote this.

The program was developed in consultation with Commonwealth Government consumer agencies and with consumer groups. It has industry and retailer support and I am confident it will play a significant role in improving the image and the quality of furniture in Australia.

Australian producers and consumers will gain most benefit from it, but the program is also open to imported goods that meet the program's criteria.

The industry, through its association, has developed a training package for retailers.

In Australia, and I believe New Zealand, the bulk of domestic furniture sales are through retailers.

To do this effectively, sales-staff need knowledge about the product. Information which assists sales staff is crucial, particularly as the turnover in some major retailers reaches 25 per cent a year.

The training package will assist in staff education. I would expect individual manufacturers to supplement this general information with their own brand-specific information.

The Commercial furniture sector has also been active.

The Commercial Furniture Industry Association has developed Buysafe , a guide to help purchasers assess the quality of commercial furniture.

The guide is underpinned by a Code of Practice that will assist with both safety and quality issues in commercial furniture.

The Australian Furnishing Industry has established a new system of national awards to provide a strong public profile for design and quality within the industry. The inaugural awards will be made in Western Australia later this year.

A recent initiative of the industry has been the promotion of Australian feature grade hardwoods. Until recently the bulk of this hardwood was pulped.

But it is now recognised that the character written on this wood is uniquely Australian, including the effects of bushfires, borer holes or gum marks.

In many ways, it is making a virtue of necessity, but it has struck a chord both in Australia and, increasingly, overseas.

This use of feature grade hardwoods provides a point of distinction in a world of increasingly generic products.

The forest industry in Australia and governments through Regional Forest Agreements have become increasingly focused on ensuring that wood production is more sustainable.

Furniture is at the top end of value adding and, increasingly, is using plantation timbers.

This applies to both hardwoods and softwoods. I understand that some plantation eucalyptus is suitable for use in furniture within 15 years of planting.

Conclusion

My aim today has been to outline activities in Australia in the furnishing industry. The challenges of global competition apply to us all.

Governments can facilitate change and we are attempting to do this with the furnishing industry.

The industry must, however, take firm steps to determine its own future. It has made a start and I expect the Action Agenda will identify further areas where the Australian industry can take the lead.

There are some areas where the New Zealand and Australian furniture industries can improve links and work together.

I believe this needs to be further explored and am pleased that both industries are taking up the opportunity this presents.

Thank you.

 

 

jy  1999-08-13  13:51