David Martin, Director – Emerging Industries & Innovation, Australian Industry Group – discusses ways to lead Australian manufacturing into a high-value future.
**This story originally appeared in the April 2026 edition of AMT Magazine**
Australian manufacturing is a sector built for this moment. The challenges are real, the pressures are well documented, but so is the opportunity, and it is bigger than many people recognise.
Let’s start with the fundamentals. Australian manufacturing is our sixth-largest industry, contributing $137 billion in value-added output and employing 930,000 people. It generates 12.4% of our exports and accounts for 7.9% of national capital expenditure – outsized contributions for a sector representing just 5.1% of GDP. Critically, it is also Australia’s most R&D-intensive industry, reinvesting 4.1% of value-added back into research and development. These are the numbers of a sector with genuine strength, deep capability, and a proven capacity to innovate.
Yes, 2024 was a difficult year. After a strong post-pandemic rebound, conditions tightened as a sluggish domestic economy weighed on demand and global supply chains normalised. But the sector has navigated far harder periods than this, and the transformation underway is one we should be energised by, not anxious about.
The composition of manufacturing is shifting in exactly the right direction. Food and beverage processing and metals production have grown strongly, capitalising on Australia’s reputation for quality, safety and provenance. The trend is toward higher-value, more innovation-driven activities and away from commodity-based operations that were always going to face margin pressure. This is not a crisis; it is a sector repositioning itself for long-term competitiveness. The question is whether we accelerate that transition with intent or simply drift through it.
Moving up the value chain requires investment in commercialisation, workforce development, and technology adoption. This is where the national conversation needs to sharpen. As Australian Industry Group chief executive Innes Willox recently noted, productivity growth averaged 1.2% a year in the decade before the pandemic, since 2020 it has run at just 0.2%.
That gap represents forgone wages, forgone investment, and forgone opportunity. The causes are known: regulatory burden, an effective company tax rate that is the second highest in the OECD, fragmented workplace relations, and underinvestment in technology.
These are solvable problems and solving them is what unlocks manufacturing’s next chapter. For our sector specifically, that means embracing Industry 5.0 technologies, accelerating AI adoption on the factory floor, and ensuring capital flows to SME manufacturers who are ready to grow.
On skills, the pipeline is being built. Manufacturers are partnering with TAFEs and universities to shape industry-relevant curricula and investing in upskilling their existing workforces.
Recruitment remains tight in technical and engineering roles, but the effort being made by businesses and training providers alike is producing results. Government needs to match that effort with sustained funding, and the momentum is there to make it happen.
The energy transition, for all its complexity, represents one of the most significant competitive opportunities Australian manufacturing has seen in a generation.
Our abundant renewable resources, combined with our world-class minerals endowment, position Australia to become a preferred global supplier of clean energy economy critical minerals, battery components, hydrogen electrolysers and other renewable energy equipment. Manufacturers who move early to lock in affordable renewable energy and build capability in these supply chains will find themselves on the right side of a very large structural shift.
The growth frontiers extend further still. AUKUS and related defence commitments are creating a generational pipeline of advanced manufacturing work in areas like submarines, aerospace components and sovereign capability. Australia’s food and agribusiness sector has enormous headroom to capture more value through processing and premium branding.
And the global reconfiguration of supply chains, driven by geopolitical realignment and a renewed focus on resilience, is creating genuine openings for manufacturers who can demonstrate quality, reliability and proximity.
For businesses navigating today’s environment, the opportunity lies in being proactive. That means investing in productivity improvements such as process efficiency, technology adoption and energy management even when margins are under pressure.
It means building workforce capability now, so you are ready to scale when demand lifts. And it means engaging with the programs and policy settings that exist precisely to support manufacturers making the move to higher-value activity.
The relationship between industry and government has never been more important. The policy levers that will unlock productivity — regulatory reform, tax settings, skills investment, technology diffusion — require both sides to be pulling in the same direction. Australian Industry Group is committed to making that case, relentlessly and with evidence.
Australian manufacturing’s best years could be ahead of it, if the sector emerges from this period of transformation more innovative, competitive, and firmly anchored at the high-value end of global supply chains. The work to build it starts now.