Manufacturing is one of the most productive industries in the country, despite its performance being severely hit by the high Australian dollar, import competition and weak domestic confidence.
A survey by Ernst & Young shows the industry is second behind health and social services when it comes to how workers rate their productivity.
However, Ernst & Young says workers could be much more productive across all industries, with an estimated $305 billion going unrealised due to unsatisfactory conditions for staff.
It comes as companies across the manufacturing, services and construction industries say productivity spending was a No. 1 priority for the federal government ahead of the budget. They also called on cuts to the company tax rate to stimulate corporate efficiency.
Ai Group chief executive Innes Willox said despite concerns over the federal government's $12 billion deficit, the poll of 330 companies revealed that balancing the budget was, in fact, "not the main game" for businesses.
"While business appreciate the need for budget discipline, in this slowing economy the majority of businesses rank objectives that will help rebuild competitiveness more highly than bringing the budget back into balance," he said.
The Ernst & Young six-monthly survey of 2100 employees across seven industries revealed four out of five workers felt they could be more productive. Workers said the main obstacles to productivity improvement related to staff engagement, wellbeing, motivation, reward and recognition in the workplace.
"While cost-cutting and corporate restructuring have resulted in a net productivity gain for the nation, there are worrying signs that stress from these programs may be starting to reverse some of the productivity gains made over the past 12 months," Ernst & Young's Oceania advisory leader Neil Plumridge said.
Australian manufacturers are battling the high dollar, competition from imports, soaring energy costs and weak domestic confidence.
The Australian Industry Group's Australian Performance of Manufacturing Index fell to four-year lows in April, dropping 7.7 points to 36.7 points, its lowest since May, 2009. Readings below 50 represent a contraction in the sector.