In a mixed bag of economic news, the Australian Industry Group (AIG) has expressed concern over the resurgence of cost pressures for manufacturers, despite a continued slowdown in consumer inflation.
Innes Willox, chief executive of AIG, highlighted these conflicting trends following the release of new data from the Australian Bureau of Statistics (ABS).
According to the ABS, growth in producer prices—the prices for goods and services utilised by industries—decreased from 4.8 per cent to 3.9 per cent per annum in the September quarter.
This decline was primarily influenced by a significant easing in the price growth of inputs for house building, which fell to just 1.4 per cent per annum.
Willox noted that this reduction is a positive development, likely to alleviate some of the cost pressures that have been affecting the construction industry.
However, the data reveals troubling signs for the manufacturing sector. Manufacturing input prices increased by 3.8 per cent per annum during the quarter, with a steady rise observed over the past year.
Electricity prices for manufacturers surged by 4.7 per cent per annum following the expiration of coal price caps on 1 July.
Additionally, costs associated with road transport and warehousing—critical components for many industrial sectors—exhibited similar upward trends.
“This data suggests that the supply-side constraints driving much of Australia’s inflation challenge clearly remain in key industrial sectors,” Willox stated.
He emphasised that manufacturers in consumer-facing sectors are now grappling with the dual challenge of controlling consumer price growth while contending with rising input costs.
Willox warned that persistent inflation is a significant issue for both households and businesses.
“While recent slowing of CPI is welcome, genuinely combatting inflation requires measures to alleviate both supply constraints and price pressures across the economy,” he concluded.
