New Consumer Price Index (CPI) data shows inflation has risen by 5.1 per cent over the last 12 months with an interest rate increase appearing likely.

The Reserve Bank of Australia will announce its plans regarding an interest rate rise next Tuesday, with economists indicating the cash rate could rise from the current 0.1 per cent to 0.25 per cent, with consecutive rate rises to follow throughout the year.

The news confirmed what many have been feeling – everything is costing more with construction and fuel leading the charge.

Sprinter got in touch with a few printers to gauge what the inflation rise and potential increase in interest rates might mean for business. The consensus was the situation was not surprising, and that while it may hinder equipment decisions, it was to be expected and something that had already been factored in.

Spot Productions managing director Simon Carmody said the inflation rise was not unexpected, adding having fixed rates on loans and a buffer by paying off principal means he is not overly worried.

He added the biggest issue continues to be paper and supply chain issues with a three-month wait for paper now normal.

“Paper supply is certainly a bigger issue than interest rates, a quarter of a percent won’t make a huge difference, but if you’ve got no paper, you’ve got a problem,” Carmody told Sprinter.

Educating customers about the rising costs was also key.

“We have been going through a process of educating our clients and have been inching our prices up since January as costs went up. Pricing is obviously determined by the market, plus freight and transport is also going up so here at Spot we have been reviewing our prices accordingly,” he said.

“I think inflation will stabilise in the next six months but there will be a new normal. Once the government has been re-elected and we have come certainty we will reset to a new normal and that is what it is going to be.”

Impact International managing director Aleks Lajovic was surprised the inflation rate was not higher, due to the price rises he is seeing in the supply chain.

“What we’re seeing from our cost basket from materials is that prices are increasing 10 per cent or 15 per cent, and in some cases more than 20 per cent,” Lajovic told Sprinter.

“Increased inflation rates will mean that the price of machines in printing and packaging will be more expensive. Normally, the Reserve Bank raises interest rates to try and get inflation under control. So, you’re probably going to see a more expensive machine to purchase, and higher interest rates payable on the repayments.”

Lajovic added this is not a good environment to be in when buying new equipment, especially as most equipment used for printing and packaging is not manufactured in Australia, which means increased shipping prices are another issue.

“Shipping costs aren’t going up by five per cent; they’re up by a couple of 100 per cents,” he said.

“At Impact International, we’re looking for as many efficiencies as we can so we can try and absorb the costs internally. We’ve only had one price increase of five per cent in the last 12 months.

“I would not be surprised if we’re going to the market in the next three or four months with another increase because the costs are not stabilising. Nobody that we interact with thinks that we are at the peak of this pricing curve and that we’re going to come over the hill and start to go down.

“Customers so far been fair and understanding. They recognise that a price hike of five per cent in more than 12 months is very low. But again, we’ve been very conservative with our price increases.”

Cactus Imaging co-founder Keith Ferrel said the price rises that have come through the supply chain over the last period indicate many people knew a rate rise was coming.

“I think people already knew it was coming. Substrates have gone up 50 to 60 per cent and paper is up, vinyl is certainly going up and inks are up on average of 8 to 10 per cent so I think a lot of it has been built in when these increases have been announced, so it was clear it was all going to happen,” Ferrel said.

“The price of petrol and the cost of doing business has just gone through the roof. It is the same story across the board, and it is not just print that is impacted it is every industry. To import stuff from China over the last 12 months, the price of containers has gone up from US$2000 a container to US$10000 a container and that hasn’t just happened, that’s been going on for 12 to 18 months.

“So to me it is not a shock, it is just something you’ve got to work with and live with and it is probably even more important that you’ve got your own house in order as far as getting things done most cost effectively.”

Frank Mezo, managing director at Mezographic, said “Generally inflation can trigger a slowdown in the economy because it’s when you end up with high interest rates so the idea is to cut down on spending. I am looking at new investments this year and am thinking of buying something new, so I’m warily proceeding now.

“In saying that, most machines are sold with a fixed rate interest so that shouldn’t impact much. Where there will be an impact is on things like purchasing factories or paying rent because these prices get adjusted.”

Mezo also pointed to the rising paper and freight costs which are impacting the print sector.

“Our industry is also faced with increases in paper costs and escalated pricing in freight. The only assuring thing is that this is something that everyone will be faced with. So, the price of print will have to go up across the board. It’s going to get tough,” he said.

“But the end customer understands the issue and that we’re an industry that works on slim margins. We are living in interesting times so all we can do is adapt. As a business, you have to realise that you’re not in this boat by yourself; everybody’s facing the same issues.”

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