Australian Industry Group Australian Industry Index

Australian Industry Index

The Australian Industry Index is Australia's longest-running industry survey - the voice of Australian businesses.
Published since 1992, it draws on direct feedback from businesses across manufacturing, construction and services to give a trusted, real-time view of how Australian industry is performing.

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September 2026: Mounting uncertainty slows industrial activity

Key findings

The Australian Industry Index® declined 21.1 points in September to -25.5 (seasonally adjusted).
The activity, employment, and new orders indicators all deteriorated in September, reversing much of the improvement recorded in August.
Uncertainty remains a major barrier to industry, as volatile prices and market conditions inhibit investment, new orders and forward planning. Some firms are now reporting difficulties accessing finance.
Cost pressures remain elevated, as a second round of price rises for fuel and downstream products has seen high inflation re-emerge.
Manufacturing saw divergent performance, with upstream industries continuing to struggle with energy prices while downstream industries enjoyed better performance.
Construction activity has been slowing since Easter due to low consumer confidence and rising materials costs.

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September 2026

Respondent insights

Liaison highlights - September 2026

The main factors impacting businesses in September related to input costs and finance availability, while some negative factors eased in the month.

Uncertainty (14%) continued to weigh on activity, driven by economic conditions and international conflict and trade disruption. Businesses reported taxation changes and the Federal budget had contributed to uncertainty emanating from the energy market. Some described difficulty forecasting demand and smoothing production in uncertain conditions.

Demand impacts (8%) eased from August but were widespread. Businesses reported low enquiry levels, fewer orders and customers delaying purchases. Cost-of-living pressures were particularly evident in retail and consumer-facing sectors. However, stronger demand from data centres, defence, renewable infrastructure and some machinery and equipment customers provided pockets of growth.

Input cost pressures (22%) were the largest negative impact in September. Businesses reported higher prices for energy, fuel, freight, raw materials, imported components, insurance and property-related charges.

Wage increases added further pressure. While some businesses were passed these costs on, price-sensitive customers and competition from cheaper imports continued to constrain margins.

Finance availability (18%) deteriorated sharply. Businesses reported that loan and lease approvals took longer, as lenders were more cautious about credit risk and exposure. Constrained investment capital also limited businesses ability to respond quickly to new orders or expand capacity, while customers had greater difficulty financing equipment.

Workforce availability (8%) was a consistent constraint. Shortages of skilled trades and difficulty recruiting and retaining staff limited capacity, with some businesses operating at full utilisation with their current workforce. Absenteeism and illness also affected efficiency at the end of winter.

Supply chain issues (8%) increased in September as respondents reported shortages of components and metal products, longer lead times for imported inputs and higher shipping costs associated with Middle East restrictions delayed production and order fulfilment.

Activity indicators

Industrial activity

The activity/sales indicator fell by 28.5 points to -31.0, returning to deep contractionary territory in September.
The employment indicator also dropped to -15.6 points, slipping back into negative territory and reversing gains from the previous month.
Monthly (non-trend) results have been very volatile since the start of the energy crisis in March.
Activity was weak in September, reflecting soft domestic demand, cost-of-living pressures and high interest rates although some reported improved lead quality from new marketing initiatives.
Employment was constrained with businesses citing shortages of qualified tradespeople, alongside difficulties retaining workers in a tight labour market.

Leading indicators

New orders remained low, with the indicator falling by 22.4 points to -35.9 in the month. This reversed gains seen in August, with trend scores pointing to suppressed new orders since the energy crisis.
Input volumes also weakened, decreasing from to -12.9.
New orders were subdued with businesses citing low enquiry levels, soft demand and weaker business confidence due to economic uncertainties.
Input volumes declined in September amid weaker demand, fewer orders and lower customer activity, while ongoing supply chain constraints continued to affect production.

Prices and wages

Pricing indicators moved in opposite directions in September.
Input prices eased by 10.6 points to 56.8, while sales prices increased by 13.0 points to 13.6, suggesting some improvement in businesses' ability to pass through costs.
Despite narrowing from the previous month, the gap between input and sales prices were elevated at 43.2 points.
The average wages indicator rose by 2.8 points to 49.5 in September, pointing to continued wage pressures.
Cost pressures stayed elevated, driven by wages, energy and freight, with costs passed on to customers.

Australian PMI® and PCI®

The Australian PMI® (Manufacturing) improved by 6.2 points in September to -8.7 but remained in mildly contraction.
Manufacturers noted that rising input costs and wage pressures are increasingly affecting both customers and businesses, contributing to delayed investment decisions and softer orders.
The Australian PCI® (Construction) fell sharply by 29.8 points in September to -34.5, indicating a significant deterioration in construction activity.
Constructors reported weak customer confidence, low enquiry levels and subdued activity, with broader economic uncertainty continuing to weigh on demand.

Upstream manufacturing

Upstream manufacturing sectors continued to contract in September; the chemicals index fell by 1.4 points to -14.2.
Chemical manufacturers reported rising costs for raw materials, freight, utilities and fuel, alongside weaker demand, higher competition due to growth in datacentre activity, and Middle East shipping disruptions.
The metals index declined 8.9 points to -26.6. Metal manufacturers reported softer orders, import competition, staff absenteeism and regulatory constraints, though some secured long-term contracts and benefited from seasonal demand.

Downstream manufacturing

Downstream manufacturing was mixed in September; the machinery & equipment index contracted at a similar rate to August falling by just 0.2 points to -14.7.
Some machinery manufacturers had a lift in demand from datacentre, defence and renewable energy projects; others noted reduced capital investment, skills shortages, and higher costs including interest rates.
Food, beverage & TCF jumped by 39.1 points to 19.8 due to stronger orders from by weather-related demand, new customers and conversions from marketing activity.
Others noted rising inventory, higher utilities and insurance costs and supply disruption of plastic packaging.

Business-oriented services

Business-oriented services dropped significantly by 31.0 points to -31.1 in September.
The sector covers utilities, technical services, and supply chain and transport providers.
A large share of businesses reported ongoing uncertainty, inflationary pressures and supply chain shortages affected order completion. The upcoming Victorian election was mentioned by several respondents as a factor weighing on business activity.
Some respondents reported stronger order volumes, supported by increased warehouse capacity, business expansion and flow-on effects of data centre construction.

Capacity utilisation

Capacity utilisation in Australian industry moved down to 77.2% (seasonally adjusted) in September.
In trend terms it has edged slightly upward over the past year and improved this month to its highest level since October 2025.
Some respondents reported improved capital availability associated with warehouse expansion projects and better supplier availability of metal components.
Although capacity utilisation improved, it was constrained by rising costs, labour absenteeism and increased competition.

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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