COUNTRIES including Indonesia, Vietnam and Turkey have overtaken Australia as efficient manufacturers in the past year.
As the Turnbull Government this week prepares to release its innovation strategy which intends to forge a new path for the nation, figures from consultancy Deloitte show Australia's competitiveness as a manufacturer has slipped from No 16 to No 21 in only 24 months. 
This comes as the Australian economy braces for the closure of Ford's Broadmeadows car factory and Geelong engine plant next year.
In a sign things could get tougher, the 2016 Global Manufacturing Competitiveness Index report from Deloitte Global and the US Council on Competitiveness says Australia risks slipping to No 22 by 2020.
In worrying signs, other countries which also have had dying manufacturing sectors leapt ahead, with the UK jumping from No 15 to sixth, Switzerland from No 22 to No 12 and Sweden from No 21 to No 13.
But peak industry body the Australian Industry Group yesterday said if the Turnbull Government's long-anticipated innovation statement succeeds in boosting entrepreneurialism it could bring "substantial and sustainable" improvements in living standards to the nation.
"A faster pace of innovation can help create a more diversified and resilient economy as we restructure in the wake of the mining investment boom," AIG chief executive Innes Willox said.
The Government statement will target 30 goals across 11 portfolios in a bid to bring jobs and wealth by linking with big industrial economies and their supply chains.
It is expected to include tax breaks for venture capital funds and start-ups, plus collaborations with German hi-tech producers such as SAP and Siemens.
A battle to be the party of innovation is increasing with Labor also pushing its credentials through a statement on Friday saying it would offer innovation tax incentives.
In signs Western nations that have had stagnating manufacturing bases are rebounding, Deloitte predicts that over the next five years the US will overtake China to become the most competitive manufacturer in the world.
Deloitte Australia manufacturing group leader Damon Cantwell said Australia could learn from the US, notably its investment in research, technology and innovation.
"Given these global trends, the uptake of advanced manufacturing techniques in the Australian sector is the key to future consolidation and growth," Mr Cantwell said."These innovations change the basis of competition for Australian manufacturing away from cost only, which suits the structure of the local manufacturing sector."