A Federal Government taskforce has found Australia's manufacturing industry can survive if it makes the most of opportunities in Asia.

The taskforce was set up last year after a series of job losses in the automotive industry.

It has been looking at ways the manufacturing sector can compete with the high Australian dollar and how it can make the most of booming Asian economies.

The report found Australia can capitalise on upstream processing and by continuing to make machinery for the mining industry.

It also says there are opportunities in defence supply chains.

Prime Minister Julia Gillard says a strong manufacturing industry is vital to Australia's future "in the days that lie beyond the resources boom".

"It provides working people with jobs, good blue-collar jobs," she said.

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Ms Gillard says the Government supports most of the report's recommendations but rejects suggestions to look at setting up a sovereign wealth fund and a domestic reservation policy for gas.

The non-government members of the panel have stressed the need to minimise the impact of the carbon tax.

Australian Industry Group chief executive Innes Willox says on top of the high Australian dollar, the industry is facing several well-known challenges.

"High input costs, particularly around energy, slow productivity growth," he said.

Mr Willox says the impacts of the carbon tax must be monitored and countered if Australia is to remain competitive in the global market.

Australian Manufacturing Workers Union national secretary Paul Bastian says the report shows tens of thousands more jobs will be lost if the Government does not act.

"The Government should lead a buy-Australia campaign," he said.

"We should put some stimulus back into residential and commercial construction, and most importantly we should ensure that our exporters have a level playing field when they're dealing with our trading partners."

Opposition industry spokeswoman Sophie Mirabella says while the report acknowledges the carbon tax affects Australia's competitiveness, it does not clearly spell out its impact.

"You can't expect the trade union bosses who anointed and crowned Julia Gillard as Prime Minister of this country to attack a very important policy that forms the platform of her government," she said.