UPDATE: GlaxoSmithKline Shuts Australian Packaging Site

--GlaxoSmithKline ends tablet packaging operations in Melbourne

--Cites high A$, labor costs for closure

--Company will focus on making more sophisticated products

(Adds reason for the closure, background on manufacturing downturn throughout)

By Ross Kelly

SYDNEY--GlaxoSmithKline PLC (GSK) said it would close an Australian tablet-packaging facility and lay off 120 workers, joining a string of manufacturers that have shut factories, slashed jobs and relocated production overseas in response to high labor costs and a strong local currency.

The U.K.-based pharmaceutical giant said the Melbourne plant would now focus on making more specialized products such as packaging for respiratory treatments and sterile containers for medicines.

Manufacturing in Australia has been in long-term decline, in part because the Australian dollar has been at close to 30-year high against the U.S. dollar for more than two years, making exports uncompetitive. As a share of the economy, manufacturing stands at around 7%, down from 30% in the 1950s.

The Aussie dollar has fallen 5% so far this month following a surprise rate cut by the country's central bank that took the nation's key interest rate to a record low 2.75%. But it is still trading at about 98 U.S. cents, compared with low of about 60 U.S. cents in late 2008 in the wake of the global financial crisis.

General Motors Co.'s (GM) Australian unit said last month it was cutting 500 jobs, or about 12% of its workforce, citing pressure from the nation's strong currency and intense competition in the local automobile market.

Coca-Cola Amatil Ltd. (CCL.AU), which distributes Coca-Cola Co.'s beverages in Australia, and Casella Wines, which makes the nation's mass-market Yellow Tail wine, have also warned in recent weeks that the Aussie dollar's strength is hurting earnings by making their products less competitive against overseas rivals.

A spokeswoman for GlaxoSmithKline said a manufacturing plant in Sydney would be unaffected by the Melbourne closure. The Sydney facility, which makes packaging for over-the-counter painkillers, was restructured 18 months ago to make it more efficient, she added.

Write to Ross Kelly at [e-mail]

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