Businesses to lift prices as energy costs bite

More than a third of businesses expect to impose larger-than-usual price rises in the next three months, the latest Australian Bureau of Statistics data found.

27 May 2022 

Almost all, 92%, blamed the rising cost of products and services while 78% said fuel and energy prices were to blame, according to the head of industry statistics John Shepherd.

Mr Shepherd said some sectors were feeling the impact more than others.

“More than half of all businesses in manufacturing (58%), construction (58%), wholesale trade (57%) and accommodation and food services (54%) expect increases in the price of their goods and services over the next three months,” he said.

During May, 43% of businesses experienced increases in their operating expenses over the previous month compared to just 22% in the same month last year, and the highest level since the survey question was first asked in July 2020.

More than a third of businesses expect operating expenses to increase in the next month.

“Businesses commented that increases in general costs, fuel, materials and wages were reasons for increased operating expenses over the past month,” the ABS said.

Businesses had also seen impacts to revenue over the last month and expected changes over the next month.

Just 14% of businesses reported revenue increases over the past month, down 19% in April.

“Most businesses attributed general increases in demand and business activity as reasons for current and expected increases in revenue,” the ABS said.

He said those businesses – 48% – that had no plans to increase prices over the next three months were restricted in what they could do.

“Of these businesses, nearly half (46%) said it was to retain customers and 46% said they had fixed-price contracts in place,” he said. 

Around 18% of businesses planned capital expenditure over the next three months, with 80% expecting it to be the same or more than the usual level.

“For planned capital expenditure by employment size, large businesses (58%) were more likely to have planned capital expenditure over the next three months than medium (38%) and small businesses (17%),” the ABS said.

“However, small and medium businesses were more likely to have higher than usual planned expenditure (50% and 39%) than large businesses (25%).”

Energy prices to rise 13%

The Australian Energy Regulator default market offer predicts a continued increase in wholesale power prices in NSW and Queensland over the next two years with small businesses to be hit by price hikes of up to 13% above inflation.

“Higher energy prices are hurting businesses and families alike,” ACCI chief executive Andrew McKellar said.

“Consensus around a national plan for affordable, reliable and sustainable power generation is crucial with businesses and households set to face a surge in their energy bills.

“Soaring international energy commodity prices are pushing up wholesale prices, while small business profitability is set to be further squeezed in the coming months.”

Increasing energy costs impact all businesses.  In particular, energy-intensive sectors, such as manufacturing, will be harshly affected by rising electricity and gas prices while petrol prices, which have jumped up again to over $2 a litre, are driving up freight and input costs.

“Surging energy prices will compound the existing inflationary pressures we’re seeing across the economy.  With material and labour shortages at their most acute in almost 50 years, the increased cost of doing business is beginning to bite,” Mr McKellar said.

“Pursuing action on climate change and energy security are not mutually exclusive.  The benefits of boosting renewable energy production could not be clearer.

Energy smart businesses will benefit from engaging help to shop for the best prices.

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