Half of Australian Businesses Are Eating Fuel Costs Instead of Raising Prices

The ABS released its Business Conditions and Sentiments survey today. The headline number is that 72% of businesses say fuel costs are hurting them. The more telling number is 48%. That's the share of businesses absorbing the cost increase rather than passing it on.

The survey was reinstated specifically to measure how businesses are responding to the Strait of Hormuz disruption and the fuel price spike that followed. It's not a confidence index. It's a record of what businesses are actually doing: absorbing costs, cutting staff, delaying investment, shrinking operations.

Nearly half are protecting revenue at the expense of margin

48% of businesses are absorbing fuel cost increases instead of raising prices. That's a rational short-term call, particularly for businesses competing on price or locked into fixed contracts. But margin compression compounds. Three months of absorbing a cost increase doesn't just reduce profit. It reduces the buffer that lets you handle the next shock.

Agriculture (72%), manufacturing (67%), and construction (64%) are the industries most likely to be absorbing costs. These are also the industries most dependent on vehicles and equipment. The overlap matters.

One in six has delayed or cancelled investment

17% of businesses have shelved capital investment plans. Wholesale trade (32%) and agriculture (31%) are the most affected, followed by transport (25%) and manufacturing (23%).

Delaying a purchase doesn't eliminate the cost. It transfers it. Equipment that should have been replaced runs less efficiently, costs more to maintain, and eventually fails at the worst time. For equipment-dependent businesses, the saving on paper often shows up later as downtime and emergency repairs.

9% have already cut staff

Revenue is down for 36% of businesses. 28% have made workforce changes, with 9% reducing headcount outright. But the constraint here is input costs, not demand. Cutting capacity when the problem is your cost structure, not your order book, means you may not be able to recover when fuel costs stabilise.

Three things worth doing this week

Segment your absorption. Not all cost absorption is equal. Absorbing fuel costs on high-margin work is manageable. Absorbing on jobs where you were already tight is cash destruction. Run a margin review by job or product line. Find out which work is still profitable at current input costs and which is now costing you money to complete.

Consider a transparent surcharge. Only 6% of businesses have added a fuel surcharge or levy, but the rate is much higher in transport (36%) and wholesale (17%), where it's already standard. A visible surcharge is commercially safer than a hidden price increase or quietly degrading your service. Customers understand "fuel surcharge." They've seen it on flights and deliveries for years. If you're absorbing costs purely because you haven't had the conversation, that's a choice worth revisiting.

If you've shelved an equipment purchase, revisit the timing. 17% of businesses have delayed capex. That's a lot of deferred demand hitting the market at once when costs stabilise. The businesses that aren't waiting get better supply access now, less competition for installers and trades, and potentially better pricing from suppliers who are seeing softer demand.

This article is general information only and is not financial advice.