The association also says that the producer price index confirms that businesses have started to pass on a larger proportion of their costs, no doubt as profit margins come under increased pressure.

At the industry level prices of articles produced by the printing, publishing and recorded media sector rose by 0.1 per cent during the December 2008 quarter and by 2.4 per cent during the year to December, according to Printing Industries.

Commenting on the release of the inflation data Hagop Tchamkertenian, national manager for policy and government affairs at Printing Industries says the Australian economy is progressing through some challenging economic times.

Tchamkertenian says, “The inflation data points to the possible emergence of deflation. Economic conditions are weakening and a frenzy of discounting activity could result in a period that is associated with price reductions.”

He continues, “The problem with deflation is that because an expectation exists that prices will fall, consumers respond by postponing their purchases in the hope of purchasing the same product or service at a lower price at some point in the future.”

Tchamkertenian adds while lower prices may benefit consumers, they also affect discretionary consumer spending behaviour which drives retail sales.

He says, “We know when retail trade starts being negatively impacted, it spells bad news for the printing and associated industries. This is why it is important that deflation does not become entrenched.”

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