No. 3 - Department of Treasury - The Western Australian Government

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Western Australian Economic Summary2006 No.3Input PricesThe strength of Western Australia’s economy has led to accelerating growthin input costs.The latest Western Australian Chamber of Commerce andIndustry/BankWest Business Expectations Survey’s index of input costs roseto a record high level for the second consecutive quarter. The increasing costof inputs has also seen investment projects increase their project costestimates. (For more information on how this has affected investment inWestern Australia see the Business Conditions chapter on page 33).National Producer Price Indexes 1 data show that, over about the last yearand a half, firms have been absorbing cost of production increases ratherthan passing them on to consumers (Figure 12). The intermediate andpreliminary goods price indexes show rising costs since September 2004 (inannual average terms) while final prices have not grown as sharply over thesame period.9%8%7%6%5%4%3%2%1%0%-1%-2%Figure 12PRODUCER PRICE INDEXESAnnual Average Growth, AustraliaSep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06Final Intermediate PreliminarySource: ABS Cat. 6427.01 The three stage of production Producer Price Indexes track price changes ascommodities flow through production processes. The construction of the Indexes issimilar to the CPI, with fixed weighted items observed and periodically reviewed. TheCPI and final goods indexes will differ. The CPI measures the actual retail price paidby households for products, while the final goods index measures the price receivedby the producer exclusive of any taxes on products and transport and trade margins.The coverage of the two indexes differs (the CPI covers both goods and serviceswhile the producer price indices cover only goods); and the indexes have differentweighting bases. While available at a national level, the producer price indices arenot available at the State level.20 Department of Treasury and Finance
2006 No.3 Western Australian Economic SummaryHowever, the Western Australian Chamber of Commerce andIndustry/BankWest Business Expectations Survey reported an increasednumber of Western Australian firms (compared to previous surveys)indicating their intention to increase prices in the December quarter,illustrating that firms might be moving away from absorbing pricepressures.The same survey also indicated that half of the respondents rated labourcosts as having a more negative effect on them than fuel prices and interestrate rises (see section on wages below for further information).WagesWage Price IndexWestern Australia’s Wage Price Index rose by 1.3% over theSeptember quarter and 4.4% over the year to September (in annual averageterms) while Australia’s Wage Price Index rose by 4.0% over the sameperiod.Western Australia’s wages growth is above its long-term annual average of3.5%, but given the tightness of the labour market, it is still reasonablyconstrained, running only a little ahead of the national average.Recent wages growth reflects the effect of the resources and housing boomson the State.Table 3WAGE PRICE INDEXGrowth (%), SeptemberQuarter 2006% Change Over:Change: ChangeQuarter Year*NSW 1.2 4.0Vic 0.8 3.7Qld 1.3 4.5WA 1.3 4.4SA 1.2 3.7Tas 1.5 4.1Aust 1.1 4.0*Annual average changeSource: ABS Cat. 6345.0Figure 13WAGES GROWTH BY INDUSTRY*WPI, Annual Average Growth 2005-06Western AustraliaConstructionMiningProperty and business servicesManufacturingTransport and storageRetail tradeHealth and community servicesPersonal and other servicesEducationGovernment administration and defenceAccommodation, cafes and restaurantsAll industriesgrowth0.0 2.0 4.0 6.0 8.0 10.0 12.0triesSource: ABS Cat. 1367.5Department of Treasury and Finance 21
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No. 3 - Department of Treasury - The Western Australian Government

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