Australia has provided stability for New Zealand manufacturers during the current volatility in world financial markets.
The July BNZ-BusinessNZ performance of manufacturing index showed the seasonally adjusted index was 53.2 points, up on the same time last year and the highest it has been since July 2006.
BNZ economist Doug Steel said New Zealand manufacturers seemed to see Australia as a source of strength.
Of all the index respondents who mentioned Australia in comments on the major influence on their business, all of the comments were positive.
"This is despite deterioration in many of Australia's domestic indicators including consumer confidence, retail sales, various housing market metrics and their own PMI."
The unadjusted Otago-Southland index was 48.5 in July, up slightly from the same time last year. A reading above 50 indicates a sector in expansion and below 50 as one in decline.
Otago-Southland Employers Association chief executive John Scandrett was pleased with the result saying it was a positive move of seven points above the June figure.
"While this is still marginally in contraction mode, the month's lift presents gains in printing and publishing, metal product activities and also in selected textile and clothing operations."
Positive mentions for the Rugby World Cup developments were prominent in July, he said.
The one key element around which negative sentiment continued was related to the ongoing exchange rate difficulties. That was particularly true in July where leather, wood and paper-based export activities had again been disadvantaged, Mr Scandrett said.
BusinessNZ's executive director for manufacturing Catherine Beard said the exchange rate story for New Zealand's manufacturing exporters involves a few angles that needed to be considered.
There is no doubting that negative comments describing the overall value of the New Zealand dollar had increased from June as more manufacturers experience tighter competition for the exporting dollar.
However, Australia remains a suitable destination for New Zealand exports given the ongoing competitive exchange rate by historical standards.
