"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, Australian Industry Group.
The July Australian Industry Index® – a monthly survey of business activity in industrial sectors – reveals a clear pattern of recovery since late 2024. Activity indicators for the construction and business services sectors have been improving towards neutral this year, however manufacturing activity continues to weaken.
Manufacturers continue to report very poor business conditions, citing trade disruptions on the demand side and energy costs on the supply side as key factors. This means the industry has been left behind from the consistent improvement across the rest of the industrial ecosystem.
"Manufacturing is one of Australia's most trade-exposed industries, and is beginning to feel the effects of trade disruptions. US tariffs both hit our advanced manufacturing exporters, and subjected those which import-compete to higher pressures from trade diversion.
"Industrial gas prices – which have risen 48% since 2019 – have also hit manufacturers hard. Our competitive advantage from lower energy costs has been steadily eroded, leading to several plant closures over recent years.
"We should be worried. Manufacturing directly employs 930,000 people, generating over 12% of our exports and 8% of capex despite being only 5% of GDP. It is also an engine of innovation, reinvesting 4.1% of value-added back into R&D – the highest rate of any industry in Australia.
"Treasurer Jim Chalmers' Roundtable this month can begin a clear reform path around the issues of energy, resilience and productivity. Given its centrality to our economic success, the issues impacting manufacturing in turn impact the entire economy," Mr Willox said.
Read the July print of the Australian Industry Index
