Almost a third of Australian businesses will raise their prices in the coming months to deal with a rapidly falling Australian dollar, and consumers will be the hardest hit.
Dun & Bradstreet’s latest Business Expectations Survey shows a steady increase in the Selling Price Index since the dollar began falling last year, and now sits at a five-year high.
According to the report, 31 per cent of businesses intend to increase their prices in the first quarter, while only four per cent intend to discount.
With the majority of Aussies’ consumer goods coming from overseas, the price tags attached to cars, clothing and overseas travel are expected to increase.
“The selling price index is at a five-year high so I think it will be noticeable,” Dun & Bradstreet economic advisor Steven Koukoulas says.
With the dollar now hovering at around 81 US cents, your overseas holiday is going to be a lot more expensive in 2015 compared to last year when the dollar was mostly above 90 cents.
The Commonwealth Bank predicts the dollar could fall as low as 73 cents in June.
Hotels, food, transfers, entertainment and flights will all cost you more overseas, whether you’re downing a pint of lager in London or hailing a cab in New York.
“We’re the sector losing out,” Monash University economics professor Jakob Madsen says of consumers.
“Tourism is where consumers will be mainly hit. If you go overseas, you don’t get so much for your money.”
With the majority of Australians’ cars now manufactured overseas, the price of a new car is likely to go up as importers pass on increased costs to consumers.
“Cars will be more expensive because they’re all imported, simply because of the exchange rate,” Mr Koukoulas says.
“If you’re a car importer, you’ll have to pay more for wholesale cars and pass that on.”
So how much more will you pay?
According to Mr Madsen, “prices usually go up three, four, five per cent”.
“Definitely consumers will experience higher prices.”
Electronics and white goods
Mr Madsen says consumer goods will cost more in 2015, with the dollar currently sitting at a five-year low.
“We’ll pay a bit more for what we consume, like imported goods from China,” he says.
“It’s durable goods like cars, like whitegoods, electronics – all these consumer products are going to be hit by higher prices.”
Mr Koukoulas says the intention of businesses to raise their prices is another blow to Australians, with consumer confidence already at a three-year low.
“In a time when we’ve had a cautious consumer, where people haven’t been spending much, it’s just another negative issue.”
Clothing costs will also increase this year as retailers pass on the higher cost of making clothes overseas with a weaker currency.
“You will be seeing higher prices on some electronic goods and clothing, which are predominantly imported,” Mr Koukoulas says.
He says that online shopping could also become less popular in 2015 as online stores overseas become more expensive.
“If you buy $100 worth of stuff online from the United States today, it will cost you $125,” he says.
What will be cheaper?
Luckily for the majority of Australians, both Mr Madsen and Mr Koukoulas expect petrol prices to remain low at the bowser.
“Big falls in commodity prices including oil are having a positive impact on petrol prices,” Mr Koukoulas says.
“It’s unlikely that prices will fall anywhere else. The rest of the economy will just keep doing what it’s doing.”
Mr Madsen says consumers won’t be too much worse off in 2015 because “we’re still experiencing lower oil prices”.
“The consumer is not going to be much worse off. You have some price increases, but then on the other hand, they get much cheaper fuel.”