201501.28

CPI Outcomes Encouraging for Small Business

Wednesday 28 January 2015

Today’s Consumer Price Index (CPI) outcome is encouraging news for small businesses in Australia. The report highlights the importance of the Government’s Economic Action Strategy and success in containing cost pressures.

According to the Australian Bureau of Statistics, the CPI rose by just 0.2 per cent over the December quarter 2014.

This means that prices and key input costs have been growing at their slowest rate since March 2012.

Small businesses have experienced a long period of weak trading conditions that the Government is committed to improving.

We know small businesses have limited capacity to pass on increased input costs. This means higher input costs eat into their operating margins and profits.

Today’s CPI result is a sign of an improving trading environment and is delivering for small businesses across our nation.

In particular, the recent fall in fuel prices is helping to take the pressure off small business and family enterprise.  Unleaded petrol prices fell to $1.17 in December, which is the lowest recorded average daily price since February 2009. This means the cost of automotive fuels fell by 6.8 per cent in the December quarter meaning lower costs for running a business.

Another big positive for small businesses is the reduction in utility prices thanks to our scrapping of the carbon price from 1 July 2014.  Electricity prices fell 5.1 per cent in the September quarter and remained flat in the December quarter.

Today we have also seen further evidence of a pick-up in consumer sentiment, with the ANZ Roy Morgan index showing a 2.1 per cent rise over January.  This follows last week’s improvement in the Westpac Melbourne Institute measure, which rose 2.4 per cent.

With consumer confidence improving, price pressures easing, and interest rates remaining at historic lows, the Australian economy is expected to strengthen – which is good news for small businesses.