Australian Industry GroupResearch & Economics15 interactive charts
Key industry data
In 2025-26, Australian manufacturing delivered:
2.2%
Sales growth
0.9%
Output growth
0.7%
Jobs growth
-2.3%
Profits growth
-2.9%
Productivity growth
2.7%
Investment growth
Key factors in 2025-26
Energy crisis – Surging fuel and industrial inputs prices have put extreme margin pressure on energy-intensive manufacturers
Workforce shortages – Shortages of technical and trades employees continue to hamper manufacturing productivity and inhibit expansion
Regulatory pressures – Rising regulatory oncosts have added further cost pressures to an industry facing tight supply constraints
Outlook themes for 2026-27
Sector recalibration – manufacturing is shifting towards areas where Australia has advantage in technology and raw materials
Tech adoption – Manufacturing is the fastest adopter of new technologies, promising productivity uplifts in the face of supply-side pressures
Demography – an ageing and migrant-reliant workforce raises questions of skills renewal at a time when shortages of technical roles is highly pronounced
Contents
In the 2026 edition of Manufacturing in Australia
Section 01
Key manufacturing thematics in 2026
Industry growth
Manufacturing recovers but remains one of our weakest industries
Australian manufacturing lifted itself out of recession, growing at 0.9% p.a. in 2025-26 compared to -2.3% p.a. in the year prior.
The recovery was driven by the food and metals subsectors, which delivered the strongest growth within the industry.
The chemicals industry reported zero growth over the last year, due to the impacts of surging energy prices that have constrained output and imposed price pressures.
Other manufacturing – consisting of textile, timber and paper products – contracted by 0.3% in the face of weak consumer market conditions.
Overall, manufacturing remains one of the weakest industries in Australia, with growth of 0.9% p.a. compared to 2.3% for all industries. Allied industrials such as construction, wholesale trade and transport all showed strong growth.
This reflects a constellation of pressures – including energy prices, workforce shortages, cost pressures and productivity challenges – currently facing manufacturing.
Conflict-driven price rises causing cost pain for manufacturers
The US-Iran War has caused significant economic difficulties for Australia’s economy and energy-intensive industries.
The conflict has closed the Strait of Hormuz, trapping around a fifth of world oil and gas supplies in the Middle East.
Australia has avoided overall fuel shortages but still had to contend with significant price rises.
Local fuel prices doubled in March, then softened when the federal government halved fuel excise from April to July.
Prices have since oscillated with political developments and will continue to show volatility until a durable settlement is reached. Australian fuel prices remain 60% higher than pre-conflict levels.
This has put cost pressure on fuel-intensive parts of the economy, including transport, manufacturing and construction.
Manufacturing has faced both higher direct fuel prices, as well as higher prices for transport services and petrochemicals.
Manufacturing is one of the fastest technology-adopting industries in Australia
Over the last year, tech adoption rates in manufacturing were:
58%
for cybersecurity technologies
50%
for digital management systems
46%
for automation technologies
29%
for robotics
In each of these categories, manufacturing had the highest adoption rates of any industry group in Australia
Adoption of artificial intelligence (AI) was slightly lower than in other industries, but still forward leaning at 53% for standalone AI and 29% for embedded AI tools.
High tech adoption rates likely reflect competitive and cost pressures on the industry, but augur well for the future investment pipeline and productivity uplifts
Hiring difficulties ease but remain elevated for industrial roles
Recruitment difficulties increased sharply during the post-pandemic labour shortages, but have eased since 2024 as the labour market has normalised.
Manufacturers have faced higher than normal challenges, with 52% reporting difficulties in mid-2026 compared to 45% across all industries.
Manufacturing shares this challenge with allied industrials – construction and wholesale trade – which also face elevated recruitment difficulties.
This is due to pronounced challenges recruiting for industrial roles, with technical and trade (58%) and machinery operators (54%) facing greater shortages than other occupations.
Manufacturing competes with allied industrials for these employees, putting pressure on the under-supplied national pool of industrial trades workers
Manufacturers have faced increasing employment oncosts that are contributing to cost pressures.
Oncosts have risen from 15.2% of wages in 2015-16 to 17.2% in 2024-25. These costs add $13.5 billion to the industry’s $77.5 billion wages payroll.
The increase reflects regulatory and statutory cost drivers:
Increases in the Superannuation Guarantee from 9.5% to 12.0%.
Rising workers' compensation premiums associated with higher claim costs and workplace safety obligations
Growth in payroll tax liabilities and changes to payroll tax arrangements across jurisdictions.
Manufacturing has one of the highest oncost rates in Australia, similar to allied industrials like utilities and transport. This reflects higher workers’ compensation costs for industrial sectors.
Continued consolidation towards higher value products
The composition of Australian manufacturing has shifted towards higher value-added branches.
Food & beverage production has increased by 13% in real (inflation-adjusted) terms since the pandemic, benefiting from growth in domestic and export consumer markets.
Machinery & equipment production has been highly volatile but has delivered 6% real growth over the same period.
Metals grew strongly during the supply chain disruptions of the pandemic period, but then contracted in 2024. A recovery over the last year has seen it return to its output level of 2019.
Petrochemicals and other manufacturing have both seen output steadily decline. This reflects higher energy and input prices alongside lower international competitiveness.
Overall, manufacturing is consolidating towards branches where Australia has comparative advantage in technology and raw materials.
Energy-crisis exposed inputs drive high cost pressures
Manufacturing input prices increased by 10.7% over the 2025-26 financial year, although cost pressures were highly uneven across different branches of manufacturing
Energy-related inputs saw extremely high price rises of between 5% and 25%. This reflects the impact of the global energy crisis, which has driven by increases in the prices of fuel, raw metals, petrochemicals and other energy-intensive industrial commodities.
These were offset by price falls for many other industrial goods not exposed to energy prices. Electrical equipment, metals products, wood and other machinery all saw price falls as global markets eased.
Gas prices rose by a modest 1%, and electricity prices fell by 3% - offering some relief for energy-intensive manufacturers.
This reveals the divergent impacts of the energy crisis on Australian manufacturing – with some branches highly impacted by cost increases, and others enjoying cost falls.
Differential subindustry experiences based on products
Manufacturing prices have outpaced broader inflation, but with highly differential impacts across branches.
While overall input cost increases have been high, the effects have been most pronounced on energy-intensive branches of manufacturing – particularly the chemicals and primary metals subindustries.
Output prices have also risen rapidly, and for some subindustries have more than compensated for input costs. Polymers, machinery and beverages have all benefited in net terms from price movements.
This reflects the increasing importance of energy and energy-related prices to Australian manufacturing. Cost pressures are largely determined by a subindustry’s relative exposure to energy price movements.
While energy prices remain elevated, they will continue to drive differential performance between the energy intensive and less energy-intensive branches of manufacturing.
Significant productivity decline in manufacturing since pandemic
Manufacturing productivity has weakened significantly since the pandemic, reversing the modest gains achieved prior to 2020-21.
Overall (or multifactor) industry productivity is 4% below its level a decade ago, and labour productivity is 7% lower. Most of the decline has occurred since 2021.
While Australia’s overall productivity has been stagnant in this period, the decline in manufacturing is especially marked.
Manufacturing has particularly strong economic headwinds, including skills shortages, rising costs, supply chain disruptions and energy prices. These have combined to weaken productivity more strongly than in other industries.
Falling productivity augurs poorly for international competitiveness. Australian manufacturing is highly trade exposed through exports and import competition, and loses its competitive edge when productivity falls.
Capital expenditure eased but remains elevated in 2025-26
Manufacturing investment rates remained elevated in 2026, despite easing from the cyclical highs reached in 2025.
Businesses have maintained a stronger focus on capital investment since the pandemic, supporting a step-up in reinvestment intensity across the sector.
The manufacturing reinvestment rate was 10% of industry value added in 2026, well above pre-pandemic norms.
While investment levels have moderated amid weaker economic conditions, manufacturers continue to invest at historically high levels.
Manufacturing remains one of the most investment-intensive sectors of the economy, with reinvestment rates consistently exceeding the all-industry average.
Slow employment growth reliant on food and machinery
There were 916,900 manufacturing jobs in the June quarter of 2026, accounting for around 5% of all jobs in Australia.
Manufacturing increased its labour demand by 0.9% over the last financial year. This was modest compared to a 2.4% growth rate for the economy as a whole.
Food & beverage grew its labour demand by 8%, and machinery & equipment by 1%. All other subindustries reported falls of around 5-6%.
This reflects the asymmetric impacts of energy and other cost pressures, which have fallen hard on the petrochemical and metals subsectors.
Since the pandemic, all growth in manufacturing employment has been in either the food or machinery subsectors, while others have seen employment flat or declining.
Trade shortages lead to elevated vacancies post-pandemic
There are currently 22,300 vacancies in Australian manufacturing, equivalent to 2.4% of all jobs.
The tight labour market following the pandemic saw job vacancies in all industries rise significantly, including for manufacturing. They have eased somewhat since 2024.
The recent vacancy rate in manufacturing has been double its normal level (of around 1%), pointing to lasting difficulties in recruiting a sufficient workforce.
Manufacturing vacancies are concentrated in technical and trades occupations, where national workforce shortages and competition from construction and utilities have seen very challenging recruitment conditions.
Manufacturing has traditionally had a lower vacancy rate than other industries, but in the post-COVID labour market has matched them or been higher. This reflects its higher reliance on in-shortage technical and trades roles.
Industrial wages surge, putting extra pressure on manufacturing
Manufacturing wages increased at an annual rate of 3.2% in the June quarter of 2026.
Manufacturing wages growth spiked during the tight labour market after the pandemic, and have eased slightly across the last two years.
Manufacturing wages are broadly tracking with those of allied industrials: construction, utilities, transport and wholesale trade. This reflects the shared workforce of the industrials group.
Workforce shortages for technical and trades roles have also elevated industrial wages.
Despite the recent easing, industrial wages growth remains about 1.0% above its long-term rate of 2.0-2.5%.
Unlike allied industrials, manufacturing has less capacity to pass on high wage increases due to the competitive pressure of trade-exposure to imports.
In 2025, manufacturing stood out as having one of Australia’s oldest and fastest‑ageing workforces.
More than 36% of manufacturing employees are now aged 50 and over, up from 32% in 2015.
Manufacturing has the second oldest workforce in Australia. This reflects its large proportion of older workers in industrial trades roles, a feature it shares with the wholesale trade and transport sectors.
The sector’s aging profile is sharper than most service industries, highlighting ongoing challenges in skills renewal, succession planning, and labour supply.
As older workers retire, manufacturers face increasing pressure to attract younger entrants and adapt workplaces to support longer careers.
Migration has become an increasingly important source of labour for manufacturers amid ongoing workforce shortages.
Recent migrants – those who arrived within the last five years - account for around 5% of the manufacturing workforce.
While manufacturing is mid-ranked in terms of utilising migrants - which tends to be concentrated in service industries - they play a critical role in filling specialised and hard-to-recruit technical positions in manufacturing.
Forthcoming changes to Australia's migration settings could affect manufacturers' access to skilled labour, particularly in occupations where domestic workforce shortages persist.
As recruitment challenges continue, migration will remain an important component of workforce growth and skills supply in manufacturing.
Sources: ABS, Labour Force Detailed Quarterly, Feb 2025, ABS National Accounts, ABS LFS detailed, ABS Counts of Australian Businesses, including Entries and Exits, ABS International Trade in Goods, ABS Business Indicators, ABS Australian Industry, ABS Capex, ABS Research and Experimental Development, Businesses, Australia
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