Major Border manufacturers remain operational, but most are running at a reduced capacity after experiencing huge declines in demand amid coronavirus, says Australian Industry Group's regional manager Tim Farrah.
Mr Farrah said the latest report into Australian manufacturing levels showed while the sector continued to shrink, it wasn't contracting as quickly as it had in April.
"Locally manufacturers are still operational which is great, but a lot of them, if not all of them, are on reduced capacity," he said. "Some are operating 30 hours a week...very few are employing all staff at full time.
"Unfortunately it remains the case it could get worse."
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Mr Farrah said manufacturing and construction were initially somewhat buoyed when coronavirus hit because of forward orders, but demand had since declined and very few new orders were coming in.
AI Group executive Innes Willox said it was deeply concerning that manufacturing production and employment had fallen again in May from an already low base.
"We are steadying ourselves for further losses as indicated by the low level of new orders received," she said.
Mr Farrah said over the next eight weeks of eased restrictions, analysts would be able to get a picture of future spending trends and how they could affect the construction and manufacturing sectors.