The manufacturing sector in Australia has begun its positive production kick in four months in spite the difficulties in coping with the high value of the Australian dollar and subdued local demand.

The Australian Industry Group/PriceWaterhouseCoopers Australian Performance of Manufacturing Index (PMI) rose 5.2 points in June to 52.9, climbing above the 50-point level, which separates expansion from contraction, for the first time since February, the report from the Ai Group said.

The positive result was good news for a sector that has been struggling for some 12 months, said Heather Ridout, Australian Industry Group chief executive.

"It will contribute to some extent in recovering lost ground after an extended run of contractions," Mrs Ridout said in an issued statement.

She noted that despite the rise in activity, most respondents remained cautious, citing soft domestic demand, the strong Australian dollar and increased import competition as factors dragging the manufacturing sector.

She cited that the sector confronts some "formidable headwinds in the form of the high dollar, , rising energy costs and constraining interest rates and these are unlikely to abate any time soon."

On May 3, the Australian dollar established new highs at it rose 110.11 US cents and it is now trading within the range of 105 to 107 US cents, which had made it more expensive for the domestic manufacturing industry to cover for their overhead expenses.

The manufacturing sector was supported by expansions in construction materials, basic metals, chemicals, petroleum, and coal products.

Activity remained soft across most states, with contraction recorded in NSW, South Australia and Western Australia. (More updates)