The manufacturing sector is enjoying its longest period of expansion since 2010, and is expected to strengthen further in 2016.
Manufacturing has had its best year since 2010 as a lower Australian dollar makes locally produced goods more competitive with imports.
Activity in the sector has risen six months in a row, its longest period of expansion in five years.
The Australian Industry Group's Performance of Manufacturing Index (PMI) declined marginally by 0.6 points to 51.9 in December, but stayed above the crucial 50 mark that shows that activity is rising.
Ai Group chief executive Innes Willox said it is a welcomed turnaround for the manufacturing sector, which has been in the doldrums for much of the past five years.
"With export growth solid and production, sales and new orders all on the rise, there is now a very good base from which manufacturers can launch a prosperous 2016," he said.
However Mr Willox said the downturn in mining and resources will be a drag on manufacturing.
"The ongoing contraction of mining investment and tough conditions in global metals markets continue to constrain the growth of the sector and its role in rebalancing the Australian economy," he said.
The survey's respondents said the low Australian dollar, which is 10 US cents lower than it was a year before, was supporting exports and local orders.
They also said improved business and consumer confidence was helping increase demand for locally produced goods.
Activity in five of the eight manufacturing sub-sectors rose in December, with food, beverages and tobacco the strongest, enjoying its 11 month of expansion.