Australian manufacturers are still investing heavily in 2010 despite the end of the Federal Government's special investment allowance in 2009, with the focus now on automation to make themselves more efficient and profitable.
According to leading equipment finance group Interlease, lending activity for capital purchases has been strong over the first quarter of 2010. Companies across a wide range of manufacturing sectors have taken out finance over the first few months of the year to place orders to buy new plant and machinery from the United States and Europe.
"There was a lot of equipment purchase activity in 2009 that was specifically driven by the investment allowance and tax relief efforts," says Interlease director, Andrew Sutherland. "That strong activity has flown through into 2010 as our economy has gained momentum and because borrowing conditions remain quite favourable, with the strong dollar and still relatively low interest rates.
"Interestingly, many of the manufacturing companies that are buying new equipment are focusing on automation with the intent of streamlining their operations so they can gear for growth without having to increase the costs from additional labour."
Mr Sutherland said manufacturers purchasing automation equipment, including robots, were looking to increase efficiencies, reduce their labour costs and improve their overall bottom line.
"We have had some very large equipment purchase orders put through in recent months, and a common theme seems to be automation," he said "I believe that most organisations throughout this year will look to acquire additional equipment simply with the rationale that they want to find ways to improve their bottom line performance.
"Economic conditions have accelerated the need for organisations to look for ways to improve their efficiencies. The economic arguments are even more convincing with the strength of the Australian dollar against the US dollar and Euro, which is making the decision to import from overseas more compelling because it has become more affordable.
"With the very healthy $A and low rates, now is a time for organisations to look at ways to automate to improve their profitability. With the right financing structures in place, including Letters of Credit, lease and escrow arrangements, and by accessing the best borrowing facilities, companies are really in the box seat to lock in a good deal at the moment."
Article by Andrew Sutherland