Latest Research: Top 3 Australian Manufacturing Challenges

Latest Research: Top 3 Australian Manufacturing Challenges

The Australian manufacturing industry, a vital component of the national economy, is navigating a complex landscape in 2025, marked by significant challenges that threaten its growth and competitiveness. The Manufacturing Growth Hub, an online community providing access to experts in fields such as accounting, HR, occupational health and safety, legal, process engineering, workflow optimization, marketing, sales, software technology, and funding support, is poised to address these issues. This report, based on extensive research, government data, and industry surveys, identifies the top problems faced by manufacturers and details how the Hub can help, offering a comprehensive analysis for industry stakeholders.

Identifying the Top Challenges

To pinpoint the most pressing problems, we analysed recent industry reports, government statistics, and surveys from organisations like the Australian Industry Group (Ai Group), Westpac, and the Australian Bureau of Statistics (ABS). The focus was on challenges alignable with the Hub’s expertise, ensuring practical solutions. The top three problems identified are:

1. Workforce Challenges (Skills Shortages, Recruitment, Retention)

 - The manufacturing sector is grappling with significant skills shortages, particularly in technical and trade roles. The Ai Group’s 2023 Skills Survey revealed that 90% of CEOs expect staffing shortages in 2023, with 36% reporting that skills shortages will inhibit business growth. Jobs and Skills Australia’s 2023 Skills Priority List highlighted that 31% of assessable occupations in manufacturing experienced worker shortages, including roles like robotics engineers and CNC machinists. This issue is exacerbated by a gender imbalance, with male-dominated occupations like technicians and trades workers facing persistent shortages.  

   - The impact is profound, with businesses struggling to fill vacancies, leading to delayed projects and reduced competitiveness. The 2022 Matthews report noted that 80% of manufacturers struggle to find people with the necessary skills, underscoring a workforce crisis.

2. Cost Management and Cash Flow (Rising Costs, Financial Stability)

   - Rising costs are a major concern, driven by inflation, supply chain disruptions, and increased raw material prices. The 2024 Westpac survey highlighted that manufacturers are facing a “cost crisis,” with material costs constraining output at historic levels and energy prices eroding profitability. The ABS’s 2022-23 Australian Industry report showed that while operating profit before tax (OPBT) was steady, sectors like manufacturing saw challenges with earnings growth of 2.2%, reflecting squeezed margins. The 2023 RSM report noted that financial reporting is complicated by these pressures, with entities struggling to reflect true financial positions.  

   - Cash flow management is critical, especially with slower customer payments, as noted in the Earlypay 2024 blog, which emphasised the risk of production halts without timely funds for expenses.

3. Supply Chain Optimisation (Managing Disruptions, Improving Resilience)

   - Supply chain disruptions have been a persistent issue, with the ABS’s February 2022 Business Conditions and Sentiments survey reporting that 37% of businesses experienced disruptions, down from 47% in January but still elevated compared to pre-pandemic levels (30% in April 2021). The most common issues included domestic and international delivery delays (88%), supply constraints (80%), and increased prices (75%). The Productivity Commission’s 2021 Vulnerable Supply Chains report identified that Australia’s reliance on imports makes manufacturing vulnerable, with global events like the COVID-19 pandemic causing significant disruptions. The 2025 Australian Manufacturing article noted that over 60% of manufacturers experience material delays, highlighting ongoing fragility.  

   - These disruptions lead to longer lead times, higher costs, and reduced competitiveness, with the BDO 2023 report emphasising the need for resilience strategies like diversifying suppliers and improving forecasting.

How the Manufacturing Growth Hub Can Help

The Manufacturing Growth Hub’s access to a network of experts and support for government grants and private funding positions it to address these challenges effectively. Here’s how:

- Addressing Workforce Challenges:

The Hub’s HR experts can develop targeted recruitment strategies, leveraging skills migration and training programs to fill gaps. For instance, the Ai Group’s 2023 survey showed 44% of businesses are willing to hire skilled migrants, a jump from 7% in 2021, which the Hub can facilitate. Training initiatives can focus on high-demand areas like robotics and data analytics, as suggested by RSM Australia’s 2025 insights. Process engineering experts can optimize workflows, reducing the need for certain skills and enhancing efficiency, aligning with the 2024 Atturra report’s call for automation to solve labor challenges.

- Managing Costs and Ensuring Financial Stability:

 Accounting experts can provide financial planning and cost control strategies, helping manufacturers navigate inflation and rising costs. Legal experts can negotiate better supplier contracts, as highlighted in the 2024 Earlypay blog, to manage cash flow, especially with slower customer payments. Process engineering can identify waste reduction opportunities, improving productivity and reducing expenses, as noted in the 2023 RSM report on financial reporting challenges. The Hub’s funding support can also help access government grants, like the $22.7 billion over ten years mentioned in the 2025 Pattens report, for cost-effective technology upgrades.

- Optimising Supply Chains for Resilience:

Process engineering experts can design more efficient and resilient supply chains, using technologies like 3D printing and IoT analytics, as recommended in the Romar Engineering 2021 report. Legal experts can assist with contract negotiations and risk management, mitigating disruptions, as per the EY 2022 supply chain report. The Hub’s network can facilitate collaborations, such as onshoring operations, supported by the Australian Government’s Modern Manufacturing Strategy, as noted in the 2025 Australian Manufacturing article. This aligns with the BDO 2023 report’s call for diversifying forecasting inputs to offset demand risks.

Conclusion

The Manufacturing Growth Hub is a vital resource for Australian manufacturers facing workforce challenges, cost pressures, and supply chain disruptions. By leveraging its expert network and funding support, the Hub can help manufacturers navigate these issues, fostering growth and resilience in a competitive global market. This analysis, grounded in robust data and research, underscores the Hub’s potential to make a significant impact, ensuring the sector’s continued contribution to the economy.