Manufacturers sit between suppliers who reprice freely and customers who expect stability. That is a structurally difficult position, and 2026 made it harder.
The answer is not a bigger price rise. It is a mechanism.
What moved
| Input | Change |
|---|---|
| Fuel excise | To 53.7c/L on 3 August 2026, above the pre-crisis baseline |
| Award rates | +4.75%, minimum wage +5.97% (1 July 2026) |
| Superannuation | 12%, plus Payday Super timing change |
| Interest | Cash rate 4.35%; finance costs +36.3% since March 2020 |
| Insurance | +51.7% since March 2020 |
| Energy | Small business DMO down up to 14% — the one moving in your favour |
Freight repriced twice inside five months, which flows into both inbound materials and outbound delivery.
Index-linked pricing beats periodic increases
A negotiated increase is an event. Customers resist events.
An indexation mechanism is a rule. Customers resist rules far less, for three reasons:
It is verifiable. A published index is not your opinion.
It is symmetrical. It falls when inputs fall. That single feature does more to get agreement than any argument about your margins.
It is separable. It does not touch the base rate their procurement team is measured on.
Building one
Choose indices that match your actual cost drivers. ABS Producer Price Indexes for your input categories, the Wage Price Index for labour, published fuel averages for freight. Do not use CPI — it measures consumer prices and will not track your cost base.
Weight them to your cost structure. If your costs are 40% materials, 35% labour, 15% energy and freight, 10% other, the formula should reflect that. Show the customer the weighting; transparency is what makes it acceptable.
Set a baseline date and a review period. Quarterly is standard for manufacturing.
Include a collar. No adjustment unless movement exceeds, say, 2%. Prevents constant trivial repricing and reassures the customer it will not be used opportunistically.
Publish the formula in the contract. Not a right to review — the actual arithmetic.
The conversation
“We’d rather not come back to you every year asking for an increase — it’s uncomfortable for both of us and it always arrives at a bad time.
Instead we’d like to link pricing to a published index basket that reflects our actual inputs: 40% materials PPI, 35% wage price index, 15% fuel, 10% fixed. Reviewed quarterly, only adjusting if movement exceeds 2%, and it moves down as well as up.
You get predictability and visibility. We stop absorbing volatility we can’t control. Here’s the formula.”
That is a fundamentally different conversation from “our prices are going up 6%.”
For existing fixed-price contracts
Anything signed before March 2026 was priced in a different economy.
Quantify the exposure first. For each contract: agreed price, cost to complete at current input costs, remaining term, total exposure. Rank by exposure.
Check for an existing rise-and-fall clause — and whether you are actually invoking it. A surprising number of manufacturers hold the clause and never claim, because the conversation is awkward. That is margin you already negotiated and are handing back.
Check notice requirements. Many clauses lapse if not claimed within a defined window.
The other side of the ledger
Gas. The 2026-27 Budget established a Domestic Gas Reservation Mechanism, reserving the equivalent of 20% of exports for the domestic market, intended to de-link local gas prices from international markets. Relevant medium-term for gas-intensive manufacturing.
Electricity. Small business received the largest DMO reduction of any customer class from 1 July 2026 — up to 14%. Worth checking whether you are on a standing offer.
Economic Resilience Program. The Budget made $1 billion in interest-free loans available through the National Reconstruction Fund for eligible manufacturing and logistics businesses responding to supply chain disruption.
The discipline
Know your cost per unit at current input prices, not last year’s. Recost quarterly.
A manufacturer quoting from a cost model built eighteen months ago is quoting from fiction — and in an environment where aggregate input costs moved several points inside a year, that is how a full order book produces no profit.
Where to go next
- Fixed-Price Contracts Are Killing Margin\n- Gross Margin by Service Line\n- Pricing for Profit\n- Small Business Electricity Prices Fell Up to 14%
Sources: Department of Infrastructure fuel excise fact sheet; Fair Work Commission Annual Wage Review 2026; Australian Energy Regulator; 2026-27 Federal Budget; RBA Statement on Monetary Policy May 2026; AMP Bank GO Small Business Cost Pressure Index 2026. General information, not commercial or legal advice — review your contract terms before varying pricing.