Australian Manufacturing 2025: Navigating the Storm
James McDougall
Industry Insights / Australian Manufacturing
Australian Manufacturing 2025:
Navigating the Storm
Industry Report
Softlabs Editorial Team
June 2025
8 min read
37.5%
Rise in input costs
over 5 years
over 5 years
70%
Of manufacturers
struggling to hire
struggling to hire
60%+
Report severe
supply chain delays
supply chain delays
Australian manufacturers are navigating one of the most challenging environments in a generation. A post-pandemic boom has given way to a prolonged cost squeeze — and for many businesses, the pressure is now existential. Understanding what's driving this crisis is the first step to surviving it.
The numbers are stark. Manufacturing input prices have risen 37.5% over the past five years. Energy costs — particularly gas — have climbed nearly 50% since 2019. Almost 70% of firms report difficulty hiring. More than 60% are experiencing severe delays in obtaining essential materials. And overall manufacturing productivity today sits 1% lower than it was a decade ago.
This is not a cyclical blip. It is a structural reckoning — one that is separating manufacturers who have invested in operational resilience from those running on legacy systems, manual processes, and hope. In this piece, we break down the seven critical pain points defining the industry in 2025, and outline what the path forward actually looks like.
What's Really Weighing on Australian Manufacturers
01
High Energy & Operational Costs
Gas prices are up nearly 50% since 2019, hitting heavy sectors like metals and chemicals hardest. Rising raw materials and freight costs pile on further, squeezing margins that can't be recovered through price increases in a competitive market.
↑ 50% gas prices02
Chronic Skills Shortages
The number of toolmakers and engineering pattern-makers fell 70% between 2006 and 2021. CNC machinists, industrial engineers, and robotics specialists are in critically short supply — and regional retention makes the problem worse.
70% drop in toolmakers03
Supply Chain Disruptions
Despite reshoring efforts, heavy reliance on overseas components continues to expose manufacturers to shipping bottlenecks and geopolitical disruption. Limited domestic options for specialised parts mean there's no easy local alternative.
60%+ report severe delays04
Productivity & Digital Gaps
Australian manufacturing productivity is lower now than ten years ago. Many SMEs are held back by legacy ERP platforms that cannot support Industry 4.0 requirements — leaving them unable to leverage AI, IoT, or real-time analytics.
1% lower than 201505
Regulatory Burden
Complex layers of state and federal regulation — covering tax, environmental standards, and workplace safety — consume significant management bandwidth. Net-zero commitments by 2050 are accelerating costly investments in green reporting systems.
Net-zero by 205006
Cybersecurity Threats
MManufacturing is among the top targets for ransomware globally. Production systems being held hostage is no longer a hypothetical — it's a recurring reality. Smaller manufacturers are especially exposed, lacking dedicated IT resources for operational technology (OT) protection.
#1 Ransomware Target07
Access to Capital
For SMEs, securing funding for automation investment, technology upgrades, or even basic cash flow management is genuinely difficult — at precisely the moment when that investment is most critical to long-term survival. Many firms are caught in a trap: they can't afford to modernise, but they can't afford not to.
"The manufacturers who are holding their ground aren't working harder. They're working smarter — with visibility, control, and technology built for the realities of Australian production."
— Softlabs Manufacturing Team
The 2025–2026 Outlook
Industry Forecast
Slower pain, but not less pain
Industry leaders anticipate a 2026 characterised by easing but persistent workforce shortages, continued wage and energy cost pressures, and a gradual recovery in demand. The strategic focus is shifting clearly toward sovereign capability and using automation to achieve maximum productivity with fewer people.
The pressure is unlikely to lift quickly. But the businesses emerging strongest from this cycle share a common thread: they invested in operational infrastructure when it was hard to justify, and are now reaping the benefits as conditions stabilise.
Australia's sovereign manufacturing capability matters — for our economy, our supply chains, and national resilience. Protecting it means equipping our manufacturers with the tools they need to compete.
How Softlabs Helps
ERP Built for the Realities of Australian Manufacturing
✓ Real-time job costing and margin visibility — know exactly where you're making and losing money.
✓ Automated procurement and supplier management to reduce supply chain exposure.
✓ Production scheduling optimised for constrained, skilled workforces.
✓ Cloud-based, cyber-resilient infrastructure with no dedicated IT team required.
✓ Built-in compliance and sustainability reporting tools.
✓ Local Australian implementation and ongoing support.
The manufacturers who will lead Australia's recovery are the ones investing in their operations today. We'd be glad to show you what's possible for your specific business.
Ready to See What's Possible?
Explore how Softlabs ERP is purpose-built for Australian manufacturers — with local support, local expertise, and a team that understands your industry.
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