Manufacturing is continuing to lag behind other industrial sectors in Australia’s economic recovery, according to the latest findings from the Australian Industry Group (Ai Group).
The July Australian Industry Index, a monthly survey tracking business activity across industrial sectors, shows that while construction and business services have been gradually improving since late 2024, the manufacturing sector remains under significant strain, Ai Group revealed in a news release.
“Manufacturing has been left behind from the recovery in Australia’s industrial sectors since the start of this year,” said Innes Willox, Chief Executive of the national employer association, Ai Group.
The report highlights persistent challenges in the manufacturing sector, with businesses citing weak demand caused by international trade disruptions and high supply-side costs, particularly energy prices.
It noted that these pressures have contributed to a continued deterioration in manufacturing performance while other sectors show signs of stabilisation.
“Manufacturing is one of Australia’s most trade-exposed industries, and is beginning to feel the effects of trade disruptions,” Willox said.
“US tariffs both hit our advanced manufacturing exporters, and subjected those which import-compete to higher pressures from trade diversion.”
He also pointed to rising industrial gas prices – up 48 per cent since 2019 – as a major concern, undermining Australia’s former cost advantage and leading to a number of plant closures.
Despite representing just 5 per cent of GDP, manufacturing plays a significant role in Australia’s economy, employing 930,000 people and contributing over 12 per cent of the country’s exports and 8 per cent of capital expenditure.
The sector also leads in innovation, reinvesting 4.1 per cent of its value-added into research and development – the highest rate of any industry in the country.
Willox said this month’s Treasurer-led Roundtable offers an opportunity to develop a reform agenda focused on energy costs, resilience, and productivity, and warned of the broader implications of the sector’s decline.
“Given its centrality to our economic success, the issues impacting manufacturing in turn impact the entire economy,” he said.
The content of this article is based on information supplied by Ai Group. For more information, please refer to the official company announcement and communications from Ai Group. Please consult a licensed and/or registered professional in this area before making any decisions based on the content of this article.
