Producer Price Indexes, Australia

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Contains a range of producer price indexes in the Australian economy, comprising mining, manufacturing, construction and services industries.

Reference period
December 2021
Released
28/01/2022

Key statistics

Final demand (excluding exports)

  • Rose 1.3% this quarter.
  • Rose 3.7% over the past twelve months.

What are the Producer Price Indexes (PPIs)?

The Australian PPIs measure the price change of products (goods and services) as they leave the place of production or as they enter the production process. This price change is measured from the perspective of the industries that produce goods and services. Whereas other measures, such as the Consumer Price Index (CPI), measure price change from the consumers perspective.

What is Final Demand?

Final Demand measures the price change of products (goods and services) consumed with no further processing. For example, sugar cane is a preliminary product and used as an input into the production of raw sugar. In turn raw sugar is an intermediate product which is then used to produce the final product, refined sugar. Final Demand captures final products destined for final consumption, with no further processing.

Illustrated below are two examples for the three stages: preliminary, intermediate, and final for sugar and bread.

Example of Final demand: sugar cane is a preliminary product and used as an input into the production of raw sugar. In turn raw sugar is an intermediate product which is then used to produce the final product, refined sugar. Final Demand captures final products destined for final consumption, with no further processing.

This image illustrates two examples for the three stages: preliminary products, intermediate products, and final products:

1. Sugar cane is a preliminary product and used as an input into the production of raw sugar. In turn raw sugar is an intermediate product which is then used to produce the final product, refined sugar.
2. Wheat is a preliminary product and used as an input into the production of flour. In turn flour is an intermediate product which is then used to produce the final product, bread.

A review of the PPIs will be published in March quarter 2022, consisting of an update to the weights of the Final demand, Input to the Manufacturing, Output of the Manufacturing, Output of the Services, and Input to the Coal mining indexes, in line with the 2018/19 Australian National Accounts: Input-Output tables.

Quarterly overview

 Sep Qtr 21 to Dec Qtr 21Dec Qtr 20 to Dec Qtr 21
Final demand

% change

% change

Final demand (excl. exports)1.33.7

Index reference period: 2011-12 - 100.0.

The main contributors to quarterly growth in Final demand were:

  • Output of building construction (+2.9%), due to ongoing strong demand for housing and builders passing on rising material and labour costs.
  • Heavy and civil engineering construction (+1.4%), due to rises in steel, oil and labour costs supported by increased investment.
  • Motor vehicle and motor vehicle part manufacturing (+4.4%), due to ongoing shortages of semi-conductors and other components limiting production, restricting supply, and contributing to higher prices as demand for new vehicles remains strong.

Offsetting the rise were price falls in:

  • Electricity supply, gas supply; and water supply, sewerage and drainage services (-0.9%), due to higher electricity consumption spread over fixed costs, driving down the cost per unit consumed.
  • Sugar and confectionery manufacturing (-4.4%), due to a fall in chocolate resulting from promotional Christmas discounting.

The annual rise of 3.7% in Final demand to December 2021 is the strongest increase since March 2009.

Rounding

Any discrepancies between totals and sums of components in this publication are due to rounding.

Construction

Input to the house construction industry

Input prices to the house construction industry rose 3.8%

Input prices to house construction rose due to increasing material costs and government grants in the residential sector continuing to stimulate demand for materials. Suppliers struggled to meet demand due to stock shortages. Increasing international freight costs also contributed significantly to the strong rise for materials.

Over the past twelve months, Input prices to house construction rose 12.0%, due to; Timber, board and joinery (+18.4%) and Other metal products (+13.2%).

Input prices to house construction rose in line with increased costs and strong demand for building materials, the main contributors were:

  • Timber, board and joinery (+6.0%), driven by structural timber (+15.4%), due to ongoing demand in all states, stemming from government stimulus and increasing international freight costs.
  • Other metal products (+4.1%), driven by aluminium windows and doors (+3.0%), due to price rises in aluminium as a result of strong global demand and falling production outputs putting further strain on existing supply.
  • Other materials (+1.8%), driven by paint and other coatings (+6.0%), due to rising prices as a result of tight supply and increasing import costs.

Capital city price movements (Territory prices are not sampled):

  • Brisbane (4.7%), driven by Timber, board and joinery (8.3%).
  • Perth (4.7%), driven by Timber, board and joinery (5.7%).
  • Adelaide (3.7%), driven by Timber, board and joinery (6.5%).
  • Melbourne (3.5%), driven by Timber, board and joinery (5.9%).
  • Sydney (3.2%), driven by Timber, board and joinery (4.5%).
  • Hobart (2.9%), driven by Timber, board and joinery (4.3%).

Output of the construction industry

Output prices of the construction industries

Building construction prices rose 2.9% this quarter and 7.8% over the past twelve months.

Investment in the residential sector and strong activity due to government funding in infrastructure is driving demand for labour. Supply shortages and rising freight costs have resulted in upward price pressure for materials.

The quarterly price movements by class were:

  • House construction (+3.9%)
  • Other residential building construction (+2.2%)
  • Non-residential construction (+2.3%)

House construction prices rose 3.9%

House construction prices rose, driven by increases in labour costs and rising prices for timber and steel due to supply chain disruptions and associated costs. Increased demand in the industry has enabled builders to continue passing on rising prices and reduce bonus offers.

Over the past twelve months House construction prices rose 11.1%.

Other residential building construction prices rose 2.2%

Other residential construction prices increased across all states driven by rises in materials and labour costs. Rises in head contractor margins were recorded in New South Wales, Victoria, Western Australia and South Australia indicating increased activity in these states. Demand for labour and materials, driven by residential and civil infrastructure sector investment has put upward pressure costs.

Over the past twelve months Other residential building construction prices rose 5.6%. 

Non-residential construction prices rose 2.3%

Non-residential construction prices recorded a rise across all states with strong increases in New South Wales, Queensland and Western Australia. Increases in head contractor margins and preliminary costs were recorded in New South Wales, Victoria, Western Australia and South Australia. New South Wales price rises have been influenced by increased tendering activity throughout the quarter, resulting in higher market confidence.

Over the past twelve months Non-residential building construction prices rose 6.4%.

Heavy and civil engineering construction prices rose 1.4%

  • Other heavy and civil engineering construction prices rose, due to increased steel costs driven by supply chain disruptions and falls in international production outputs.
  • Road and bridge construction prices rose due to increased costs for steel and crude oil, driven by increasing freight costs and recovering demand in the Asia-Pacific region.

Over the past twelve months, Heavy and civil engineering construction prices rose 5.6%.

Mining industries

Input to the coal mining industry

Input prices to the coal mining industry rose 3.1%, due to:

  • Petroleum and coal product manufacturing, as the continued recovery in global demand for crude oil drove up diesel prices.
  • Primary metal and metal product manufacturing, as ongoing supply shortages and strong domestic and international demand resulted in an upward trend on steel prices.

Over the past twelve months Input to the coal mining industry prices rose 7.9%.

Output of the mining industry

Prices received for Gas extraction, domestic rose 5.0%, due to increases in global crude oil and LNG spot prices. Over the past twelve months Gas extraction, domestic rose 26.1%.

East Coast gas extraction prices increased, while West Coast gas extraction prices fell in the December quarter 2021

Domestic gas extraction quarterly price change

East Coast gas extraction prices increased, while West Coast gas extraction prices fell in the December quarter 2021

This map shows Domestic gas extraction quarterly price change.
West coast fell 3.0%
Prices for Western Australia domestic gas extraction fell over the quarter. The price fall is driven by increased gas supply to the domestic market.
East coast rose 6.3%
Prices for East coast domestic gas extraction rose over the quarter. The price increase is driven by international crude and LNG markets.

Manufacturing

Input to the manufacturing industry

Input prices to the manufacturing industries rose 2.8%

Input prices to manufacturing rose 2.8% over the quarter and rose 14.0% over the past twelve months.

The main contributors to input price rises to the manufacturing industries were:

  • Primary metal and metal production manufacturing (+11.1%), due to strong global demand for steel. Reduced production, in line with carbon emission reduction policies in China, has added further pressure on supply.
  • Basic chemical and chemical product manufacturing (+16.4%), due to tightened global supply of caustic soda and glyphosate. This resulted from ongoing freight disruptions and reductions in international production outputs caused by US hurricane Ida and carbon emission reduction policies in China.
  • Agriculture to manufacturing (+3.1%), due to reduced supply of beef cattle, as farmers restock herds during favourable weather conditions, causing decreased slaughter rates.

Offsetting the rise, was a price falls in:

  • Metal ore mining to manufacturing (-8.6%), due to reduced demand from China for iron ore used in steel production, in line with carbon emission reduction policies.

Output of the manufacturing industry

Output prices of the manufacturing industries rose 4.0%

Output prices of the manufacturing industries rose 4.0% over the quarter and 11.7% over the past twelve months.

The main contributors to Output price rises to the manufacturing industries were:

  • Alumina production (+41.8%), due to increasing coal and caustic soda prices driving higher costs. Alumina production levels also declined, in line with carbon emission reduction policies and heavy rainfall in China, which disrupted bauxite mining and transportation of materials, resulting in price pressure.
  • Petroleum refining and petroleum fuel manufacturing (+12.8%), due to an increase in global crude oil prices as demand for fuel increased as COVID restrictions eased.
  • Meat processing manufacturing (+6.0%), due to reduced supply of beef cattle, as slaughter rates drop, and farmers restock herds during favourable weather conditions.

Offsetting the rise, were price falls in:

  • Beverage manufacturing (-1.0%), due to bulk purchase discounting to retailers in the lead up to Christmas.
  • Confectionery manufacturing (-5.4%), due to seasonal promotional discounts of chocolates in the lead up to Christmas.

Services

Output of the services industries

Accommodation and food services prices rose, driven by: 

  • Accommodation services (+9.8%), due to borders reopening as COVID-19 related restrictions were lifted, allowing demand to return.
  • Cafes, restaurants, and takeaway food services (+1.2%), due to easing of COVID-19 restrictions which saw restaurants and cafes review their prices to reflect higher input costs.

Over the past twelve months:

  • Accommodation services prices rose 8.0%.
  • Cafes, restaurant and takeaway food services prices rose 3.5%.

Transport, postal and warehousing prices rose, driven by:

  • Water freight transport (+34.4%), due to ongoing port congestion caused by COVID-19 delays particularly across Asia and Europe. Strikes continued in Australian ports contributing to delays and rising prices.
  • Road freight transport (+1.5%), due to rising fuel costs and wages.

Over the past twelve months:

  • Water freight transport prices rose 150.9%.
  • Road freight transport prices rose 3.9%.

Rental, hiring and real estate services prices rose, driven by: 

  • Real estate services (+3.5%), due to continued growth in the housing market.
  • Non-residential property operators (+0.4%), due to a rise in industrial rents resulting from increased demand for industrial spaces, for storage of e-commerce goods and accommodating employees, as COVID-19 restrictions eased. Offsetting this rise are falls in office and retail rents.
  • Passenger car rental and hiring (+2.7%), due to COVID-19 related travel restrictions easing in NSW, VIC and ACT, allowing demand to return.

Over the past twelve months:

  • Real estate services prices rose 9.8%.
  • Non-residential property operators rose 2.5%.
  • Passenger car rental and hiring prices rose 28.3%.

Professional, scientific and technical services prices rose, driven by:

  • Management advice and related services (+1.4%), due to increased wages.
  • Architectural services (+2.3%), due to high demand from the construction industry and rising costs.

Over the past twelve months:

  • Management advice and related services prices rose 3.2%.
  • Architectural services prices rose 2.9%.

Other services industries prices rose, driven by: 

  • Hairdressing and Beauty Services (+1.2%), due to the lifting of COVID-19 restrictions in various states allowing demand to return, and increased wages.
  • Funeral, Crematorium and Cemetery Services (+2.6%), due to price rises in funeral directing services and increased costs for caskets.

Over the past twelve months:

  • Hairdressing and Beauty Services prices rose 3.7%.
  • Funeral, Crematorium and Cemetery Services prices rose 6.0%.

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Final demand

Final Demand, index numbers and percentage changes

Construction

Input to the house construction industry

Input to the House construction industry index, weighted average of six state capital cities, index numbers and index points 

Output of the construction industry

Output of the Construction industries, subdivision and class index numbers 

Mining industries

Input to the coal mining industry

Input to the Coal mining industry, index number and percentage changes

Output of the mining industry

Manufacturing

Input to the manufacturing industry

Output of the manufacturing industry

Output of the Food manufacturing industries, subdivision, group and class index numbers

Output of the Beverage and tobacco product manufacturing industries, subdivision, group and class index numbers

Output of the Textile, leather, clothing and footwear manufacturing industries, subdivision, group and class index numbers

Output of the Wood product manufacturing industries, subdivision, group and class index numbers

Output of the Pulp, paper and converted paper product manufacturing industries, subdivision, group and class index numbers

Output of the Printing (including the reproduction of recorded media) industries, subdivision, group and class index numbers

Output of the Petroleum and coal product manufacturing industries, subdivision, group and class index numbers

Output of the Basic chemical and chemical product manufacturing industries, subdivision, group and class index numbers

Output of the Polymer product and rubber product manufacturing industries, subdivision, group and class index numbers

Output of the Non-metallic mineral product manufacturing industries, subdivision, group and class index numbers

Output of the Primary metal and metal product manufacturing industries, subdivision, group and class index numbers

Output of the Fabricated metal product manufacturing industries, subdivision, group and class index numbers

Output of the Transport equipment manufacturing industries, subdivision, group and class index numbers

Output of the Machinery and equipment manufacturing industries, subdivision, group and class index numbers

Output of the Furniture and other manufacturing industries, subdivision, group and class index numbers

Contribution to Output to the Manufacturing industries index, group index points 

Previous catalogue number

This release previously used catalogue number 6427.0.

Using price indexes

Price indexes in contracts

Price indexes published by the Australian Bureau of Statistics (ABS) provide summary measures of the movements in various categories of prices over time. They are published primarily for use in Government economic analysis. Price indexes are also often used in contracts by businesses and government to adjust payments and/or charges to take account of changes in categories of prices (Indexation Clauses).

Use of Price Indexes in Contracts sets out a range of issues that should be taken into account by parties considering including an Indexation Clause in a contract using an ABS published price index.

Changes in this release

There have been no changes to this quarter's release.

See the full history of changes.

Additional information

The compilation of the quarterly Producer Price Index for the Output of the Retail Trade Industry, normally released as an additional update of the Producer Price Indexes, Australia (ABS cat. No. 6427.0), has been paused indefinitely as a result of changing priorities within the ABS as a result of the COVID-19 pandemic.

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