Manufacturers appear to have finally recovered from the shock of last year's federal budget, although there's still a reluctance to hire staff.
The Australian Chamber of Commerce and Industry-Westpac survey of industrial trends showed business conditions expanded for a sixth consecutive quarter.
The survey's composite index rose two points to 56.2 in the March quarter.
It has now resumed an improving trend that emerged in late 2013 after being cut short by a tough 2014/15 budget.
Westpac senior economist Andrew Hanlan said manufacturers were benefiting from rising home building activity, a lift in investment in the services sector and a sustained fall in the Australian dollar that is helping exporters.
The Reserve Bank's February interest cut was also a welcome development, although consumer spending was still below par.
But ACCI chief Kate Carnell said firms were still reluctant to take on new staff despite the growing optimism among manufacturers.
"This suggests there is scope for improving our workplace relations system to encourage manufacturers to hire," she said in a statement.
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