"The good news that consumer inflation continues to slow should be tempered by the concerning return of cost pressures for Australian manufacturers," Innes Willox, Chief Executive of the national employer association Australian Industry Group, said today.
ABS data released today shows growth in producer prices – those for the goods and services used by industry – slowed from 4.8% to 3.9% per annum in the September quarter. This was driven by a welcome easing of price growth for inputs into house building to just 1.4% per annum which will help moderate the cost pressures plaguing the construction industry.
However, the data also reveals that inflation is re-accelerating in some parts of the industrial ecosystem. Manufacturing input prices rose 3.8% per annum in the quarter, with the rate growing steadily over the past year. Manufacturer electricity prices rose 4.7% per annum as coal price caps expired on 1 July. Road transport and warehousing prices, which are a significant cost component for many industrial sectors, show a similar pattern.
"This data suggests that the supply-side constraints driving much of Australia's inflation challenge clearly remain in key industrial sectors," Mr Willox said.
"Our manufacturers in consumer-facing sectors now face the challenge of moderating consumer price growth on the sales side alongside accelerating inflation on the input side.
"Sticky inflation is a problem for both households and businesses alike.
"While recent slowing of CPI is welcome, genuinely combatting inflation requires measures to alleviate both supply constraints and price pressures across the economy," Mr Willox said.
