The Falling Aussie Dollar Could See Local Companies Lift Prices

Shoppers ‘fight’ for a retail bargain. Photo: Peter Macdiarmid/Getty Images

Take advantage of the New Year sales while you can — about a third of businesses are considering increasing selling prices this quarter, the Dun & Bradstreet monthly business expectations survey shows.

According to the report just 4% of businesses are considering discounts this quarter with the survey’s Selling Price Index for the March quarter jumping to 26.3 points, up from 17.5 points last quarter and 19.5 points last year, to reach its highest level since the third quarter of 2009.

The index measures the difference between the percentage of businesses expecting to increase prices less the percentage intending to drop prices.

The chart below shows the index increase is a trend which started halfway through 2014 and is closely tied to movement in the Australian dollar, suggesting a weaker currency is resulting in higher input costs for Australian businesses.

“Indicative of this effect, 40% of wholesalers are planning to raise their prices in the coming three months, while just one per cent will reduce,” the survey said.

Dun & Bradstreet CEO Gareth Jones said the falling Aussie dollar is having a mixed impact on the business sector.

“The double-edge nature of currency movements is being borne out in the Business Expectations Survey, with mixed views from businesses on its effect,” Jones said.

“While there has undoubtedly been a benefit for sections of the economy, such as manufacturers, the weaker dollar has introduced new cost pressures for businesses and industries that are reliant on imported goods.

“To cover these costs, many operations will be forced to lift their own prices, which will in turn flow through to other businesses and consumers alike.”

Despite mixed currency impacts expectations for the March quarter when it comes to hiring, sales, profits, capital investment and selling prices are all up, albeit marginally.

Notably, the percentage of businesses that are more optimistic about growth this year compared to last, has fallen from 74% to 65% month-on-month, and from 68% year-on-year.

Dun & Bradstreet economic advisor Stephen Koukoulas said despite the fall in optimism businesses are still more upbeat compared to last year.

“While expectations for future profits have cooled in light of recent negative news on the economy, there are also positives to be found in the gradually improving picture for business spending and hiring, which fits with recent assessments from the RBA and Treasury,” he said.

“Low borrowing rates, cheaper fuel and an improving US economy, meanwhile, provide additional cause for optimism.”

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