Australian Industry Group Australian Industry Index

Australian Industry Index

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Energy and tax drive industrial slowdown

Key findings

The Australian Industry Index® continued to signal weakness in June, declining to -30.0 (seasonally adjusted).
The activity, employment, and new orders indicators all fell in June, to some of their lowest levels recorded outside the pandemic. This points to a broad slowdown across industrial sectors.
Pricing indicators continued to trend upward, indicating growing pressures on industrial margins.
Constructors recorded a sharp contraction in new orders, driven by tax changes leading to subdued customer demand.
Energy crisis-related pressures eased slightly with lower fuel prices, but higher costs and uncertainty continue to impose burdens.
Downstream manufacturers saw some improvement but upstream suppliers continue to report supply constraints and cost pressures.

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June 2026

Energy crisis insights

Liaison highlights on energy crisis impacts - June 2026

The impact of the energy crisis on industry continued to ease in June, as fuel prices moderated further. However negative impacts persist across many aspects of business operations.

Uncertainty (15%) was the most widely reported pressure in June, driven by fuel price volatility and geopolitical developments. Businesses highlighted delays in decision making, slower approvals and postponed investment, alongside concerns about inflation, interest rates and global instability. Broader sentiment and expectations of a downturn shaped business behaviour and customer engagement.

Input cost increases (4%) were a major constraint on operations. Firms reported elevated fuel, freight and raw material costs, including plastics, resins, packaging and metals. Many noted supplier price rises and the challenge of managing procurement amid shifting material costs. While some input prices eased, earlier increases were still being absorbed. Limited ability to pass through higher costs kept margins tight.

Demand (13%) reflected uneven conditions across industries. Many businesses reported fewer enquiries, delayed or cancelled orders, and increased price sensitivity among customers.

Cost of living pressures and higher interest rates weighed on spending, while activity that lifted earlier in the year softened. A reduced pipeline of new work, alongside other constraints, further weighed on demand.

Supply chain disruption (4%) affected business operations through freight delays, reduced shipping services and higher transport costs, linked to fuel prices and global conditions. Availability of imported inputs, particularly polymers and manufactured components, was uneven. Some businesses diversified suppliers or increased inventory holdings to manage disruptions, although this added to cost pressures.

Workforce availability (10%) constrained capacity and output. Businesses reported shortages of skilled labour, rising hiring and training costs, and issues with absenteeism and staff reliability. Competition for workers limited the ability to meet demand or complete work on schedule. In response, some firms adjusted work arrangements or scaled back production.

Finance availability (8%) influenced business decisions through cash flow pressures and rising cost bases. Firms cited wage increases, and higher input costs, alongside slower customer payments and delayed orders. Investment decisions were cautious, with many businesses deferring capital expenditure amid broader economic uncertainty.

Activity indicators

Industry activity

The activity and sales indicator declined to -42.4 in June, one of its lowest recorded levels outside the disruptions of the early phase of the pandemic.
The employment indicator edged down further, remaining in contraction at -15.5.
The activity indicator reflected generally low activity, uncertainty in consumer behaviour due to fuel prices and geopolitical unrest, and delays in customer orders.
The labour market remained tight, with shortages of skilled staff, rising wage costs, and ongoing challenges in staff availability.

Leading indicators

New orders fell by 5.1 points to -41.0 in June, marking one of the weakest readings since the pandemic.
Input volumes rose by 3.3 to -6.9, and on a trend basis have been flat across the last year.
Businesses reported that new orders remain weak, with a slow pipeline, delayed customer decisions, and limited sales enquiries.
New construction orders were especially affected, with respondents attributing the decline to proposed changes to CGT.
Uncertainty surrounding the energy crisis has also dragged on investment across all branches of industry.

Prices and wages

All pricing indicators moved upward in June. Input prices remain elevated levels, climbing 15.8 points to reach 80.5.
Sales prices edged higher to 19.2, suggesting weaker pricing power and limited ability to pass on costs amid soft demand.
The 61.3 point gap between input costs and sales prices is the largest recorded, indicating the highest level of pressure on profit margins in the series.
The average wages index increased by 6.3 points to 49.6, indicating a pickup in wage growth reflecting persistently tight conditions for higher-skilled roles.

Australian PMI® and PCI®

The Australian PMI® lifted 4.5 points to -16.8, easing the pace of contraction though conditions remain fragile.
Manufacturers faced rising material costs, patchy demand, constraints in raw material availability, and higher costs of doing business in Australia.
The Australian PCI® fell sharply in June, dropping 26.9 points to -38.1.
Constructors indicated that the changes to CGT announced in the federal budget had dampened enquiries, reduced orders, and prompted some firms to reassess workforce needs.

Upstream manufacturing

Upstream manufacturing indicators continued to decline in June.
The chemicals index fell 21.7 points to -50.6, its lowest level since July 2024. Chemicals reported weak sales, citing low customer confidence, raw material prices, and rising freight costs linked to Middle East tensions.
The metals index edged down 1.5 points to -16.3. Metals reported growing competition and broader industry uncertainty, partially offset by a strong project pipeline anchored in mining and construction activity.
The poorer performance of upstream manufacturing (relative to downstream) in recent months reflects its greater exposure to the global energy crisis.

Downstream manufacturing

Downstream manufacturing indicators improved in June after several difficult months.
The machinery & equipment index improved by 9.9 points to -19.7. Firms reported a seasonal lift in June, with EOFY activity bringing forward some orders.
This was offset by subdued customer demand, freight delays, weaker capital investment, and changes to tax treatment, which have prompted greater caution.
Food, beverages & TCF lifted by 12.9 points, but still remains in negative territory at -4.5. Firms reported improving demand in June, despite ongoing economic uncertainty.

Business-oriented services

The business-oriented services eased by 1.4 points, to be in contraction at -31.5 in June.
This indicator covers utilities, technical services, and supply chain/transport providers.
A large share of businesses reported slowing activity due to higher fuel costs, supply chain expenses driven by geopolitical tensions, government compliance, minimum wage rises, and strong competition in telecommunications sector.
On a trend-basis business oriented services has been in decline for the last year, and presently sits at its lowest recorded levels outside the pandemic.

Capacity utilisation

Capacity utilisation in Australian industry moved down to 72.8% in June.
Capacity utilisation scores have been trending down, but this is the lowest result since June 2020.
Capacity utilisation was constrained by rising energy costs, supply chain disruption due to freight cost, shortage of skilled labour, higher input cost and the impact of poor government regulation.
Persistent economic uncertainty, lower capital investment and tax impacts are expected to continue weighing on utilisation in the coming months.

About the Australian Industry Index

The Australian Industry Index is a monthly index that measures changes in activity in Australia’s industrial sectors. It provides diffusion indices which measure rates of changes in the level of industrial activity – expansion, stability or contraction. A positive reading indicates the activity is expanding; negative indicates contraction. The distance from 0 indicates the strength of the expansion or decline.

The Australian Industry Index is based on monthly surveys from a national sample of Australian businesses. It uses ANZSIC industry codes for classifying sectors, and weights survey results using ABS data on gross value added by sector. Seasonal adjustment and trend calculations follow ABS methodology. Read more on our detailed methodology.

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