Manufacturing conditions in Australia showed improvement early this year, with the Westpac-Australian Chamber of Commerce and Industry (ACCI) Actual Composite up to a fresh cycle high of 59.3 in the first quarter from 54.7 in the fourth quarter of 2025, its strongest since September 2023, Westpac said in a statement on Tuesday.

An increase in consumer spending is underway, fueled by a recovery in real household disposable incomes, alongside strong growth in dwelling construction and early indications of a more diverse business investment landscape.

Exports have also shown strong performance, with 20% of firms reporting an increase in the first quarter.

However, this largely pre-dates the latest conflict in the Middle East, which jeopardizes the improvements in conditions, Westpac said.

Additionally, the outlook for official interest rates has changed materially due to the recent lift in inflation, with rates expected to rise in the near term and remain elevated longer than previously anticipated through this year and 2027.