Sydney’s iconic Opera House is reflected upon a glass panel in Sydney on Tuesday.  Photo: AFP

 
Australia's manufacturing sector has run into a brick wall according to a leading business lobby on Monday, with activity levels hitting their lowest point in three years.

With 50 marking the line between expansion and contraction, the Australian Industry Group's Australian Performance of Manufacturing Index, which measures production, new orders, deliveries, inventories and employment, found a 3.5 point drop to 48.1 in the month of November.

Hampered by unprecedented drought conditions across large parts of the country, a downturn in Australia's agriculture sector is thought to be one of the key reasons for the decline.

That's because less farming output, means there is also less metal products, machinery and equipment being purchased by agriculture businesses.

According to Australian Industry Group Chief Executive Innes Willox, Monday's news has not come as a surprise.

"A decline in performance across the diverse manufacturing sector had been telegraphed by the weakness in new orders in recent months," he explained.

"The further fall in new orders in November is far from encouraging and is further evidence that the stimulus from interest rate reductions and the income tax cuts has not so far flowed through to consumer and business spending."

Calling for more to be done to reignite growth in Australia's manufacturing sector, Willox added that with a weak Christmas period ahead "the federal government will need to look very closely at additional stimulus options over coming months."