Reasons behind the result of 44.1 (with a score of 50 indicating no overall change in the sector and anything above 50 indicating growth) were listed as the slow down in mining, weak demand, high competition, the strong dollar and high utility costs.
"The softer conditions for manufacturers recorded in September looks like continuing in the months ahead with a sharper decline in the forward-looking new orders sub-index,” said Innes Willox, the Ai Group’s CEO.
“Suppliers to the mining sector, which have generally been a source of encouraging news in recent years, reported sharp falls in new orders as the mining sector responds to reduced prices and an increased likelihood of reductions in demand.”
Only two sub-sectors grew: textiles, clothing and footwear, and paper, printing and publishing.
David de Garis, a senior economist at NAB, told AAP that the result was consistent with global weakness and a slow quarter for manufacturing.
"It makes Australian manufacturing on a par with or even softer even than in the Euro-zone where the PMI flash estimate came in at 46.0," he said.
"At a reading of less than 50, a 44.1 reading is still consistent with a contracting local manufacturing industry in the September quarter."