Australian manufacturing sector faces growth and rising costs

Australia’s manufacturing sector is experiencing a period of mixed results as it enters the 2026/27 financial year. While recent data from the Australian Bureau of Statistics indicates the industry has returned to broad-based growth—with division earnings rising 1.6 per cent—profitability remains under significant pressure due to rising expenses.

Specifically, industrial machinery manufacturers have seen a sharp 79 per cent year-on-year decline in average stock on hand, according to Unleashed’s Manufacturing Health Index for Q2 2026. This decline, the largest annual fall in the index's eight-year history, is attributed to uncertain demand and the need to manage rising costs related to freight, labor, and financing.

Despite growth in areas such as food product manufacturing, the sector faces ongoing challenges including thin margins, sliding productivity, and elevated energy costs. Total industry expenses rose by 7.8 per cent, driven largely by increased purchases of goods and materials.