Manufacturing in Australia in 2025

Australia’s manufacturing sector has always punched above its weight; it’s a crucial part of our economy, but it’s also under pressure from many sides. As we head further into 2025, the sector must navigate evolving challenges and grasp emerging opportunities. Let’s dig into where things stand, what’s driving change, and where we might go next.

The Big Picture: How Big Is Manufacturing in Australia?

First up: just how significant is manufacturing today?

• Manufacturing has contributed somewhere between 5 % and 6 % of Australia’s GDP in recent years. RSM Global+3TheGlobalEconomy.com+3Manufacturing Australia+3
  

• The value-add (output minus inputs) is growing modestly: in recent reporting, manufacturing’s “industry value added” rose from about AUD 132.6 billion to AUD 134.8 billion year-on-year RSM Global

So bottom line: it’s not the dominant driver of growth in Australia’s economy anymore, but it still matters, especially in regional areas and in advanced/tradeable segments of manufacturing.

Key Challenges for 2025

The sector is under a fair bit of strain. Here are some of the main challenges shaping Australian manufacturing this year:

1. Workforce & Skills Constraints

• There’s a growing skills gap, especially in roles tied to automation, data analytics, robotics, and advanced manufacturing. Many firms struggle to recruit or train staff for these highly technical roles. RSM Global+2RSM Global+2

• Unfilled vacancies in manufacturing have reportedly increased. RSM Global

• Small and medium manufacturers often lack resources for upskilling or change management, making it harder to adopt new technologies.

2. Energy & Input Costs

• Rising energy costs (electricity, gas) are one of the top business worries in Australia currently, and manufacturing, especially energy-intensive sub-sectors is feeling the pinch. The Australian+2RSM Global+2

• Material inflation, global supply disruptions, and fluctuating commodity prices further squeeze margins.

• When energy is expensive, it reduces the competitive edge of domestic manufacturing versus imports.

3. Global Instability & Trade Uncertainty

• Geopolitical tensions, trade policy shifts, and supply chain shocks (e.g. from pandemic after-effects ) create uncertainty for sourcing and exports.

• Fluctuations in foreign exchange and trade barriers can affect competitiveness of locally-made goods.

4. Productivity & Scale Limitations

• Many manufacturing businesses in Australia are relatively small in scale, which makes it harder to absorb shocks or invest in advanced technology.

• Productivity growth in the sector has been sluggish. News.com.au+1

• Some firms still operate with legacy systems and processes; digital transformation is patchy.

What’s Next Some Strategic Moves for Manufacturers

Here are a few suggested strategic pivots:

1. Audit your energy & resource usage: Find quick wins to reduce costs & emissions.

2. Experiment with Industry: Begin with low-risk trials like quality sensors or data-driven maintenance, and grow from there.

3. Partner for scale: Collaborate with tech providers, government programs, or industry consortia to share cost and knowledge.

4. Rethink your inventory strategy: Avoid overstock, plan for surplus management, and integrate circular principles.

5. Invest in people: Reskilling is ongoing, not one-off. Encourage a culture of continuous learning and change.

6. Focus on differentiation: Design, customer service, product lifecycle, sustainability these can be your competitive edge.

Final Thoughts

Manufacturing in Australia is changing fast. Yes, there are challenges ahead, but there’s also plenty of opportunity for those ready to adapt. Businesses that invest in innovation, people, and sustainable practices today will be the ones leading the industry tomorrow.