Australian firms hold cash amid rising supply chain costs

TMX Transform says Australian businesses are holding cash rather than committing to new investment, citing interest rate uncertainty and a weaker outlook for Christmas trading.

Its latest quarterly benchmarking report tracks costs across supply chains, industrial property and construction in Australia and New Zealand. It points to rising warehousing and freight expenses alongside broader caution in business planning.

The findings suggest many companies are preparing for disruption without fully identifying their exposure. Four in five Australian businesses are stockpiling goods or building inventory buffers, yet far fewer have mapped the specific risks affecting their operations.

Two gaps stand out: shifts in customer demand and fuel exposure. The report identifies both as major blind spots, despite the pressure they can place on costs and service levels.

That comes as operating costs continue to rise across major cities. Warehousing activity rates, freight labelling and pallet storage costs have increased in Sydney, Melbourne, Brisbane, Adelaide and Perth, lifting the cost of running supply chains.

Property pressure

Industrial property remains a clear source of strain. Prime industrial rents in Sydney have reached as high as $500 per square metre, according to the report, adding to occupancy costs for companies seeking warehouse space in key logistics markets.

Construction costs are also climbing, with notable variation by facility type and location. Warehouse build costs range from $900 per square metre for ambient facilities to $2,900 per square metre for freezer sites, depending on the state.

Pressure is also moving through the construction chain. Subcontractors are passing higher costs on to builders, while builders are proposing rise-and-fall clauses on some long-lead developments to share material cost risk with developers and tenants.

These mechanisms are becoming more common in projects where pricing certainty is harder to secure over longer delivery periods. For occupiers and developers, that means the final cost of new logistics space may remain less predictable than in previous market cycles.

Planning challenge

Justin Fried, Managing Director APAC, TMX Transform, said uncertainty was shaping decision-making as much as direct cost increases.

"Business owners understand that inaction carries its own cost. Capital is expensive, and further interest rate uncertainty means that trend is unlikely to shift in the near term. Layer an unstable political environment on top of rising costs, and it's an economy businesses don't know how to plan around. That uncertainty is driving decisions right now as much as any single cost pressure," Fried said.

The report places that caution within a broader pattern across supply chains, property and construction. Businesses are facing higher day-to-day costs while trying to judge future demand. A subdued festive trading period would leave many reluctant to overcommit on inventory, labour or expansion, even as they continue to invest defensively in buffer stock.

Charlotte Jordan, Executive Director - Supply Chain, TMX Transform, said many businesses were acting before building a full picture of risk.

"Four in five Australian businesses are already stockpiling or building inventory buffers to manage disruption. That tells us most businesses know something is coming, but far fewer have actually mapped where their specific exposure sits. What we're consistently finding is that customer demand shifts and fuel exposure are the two areas getting the least attention, and they're often where the biggest risks are sitting undetected," Jordan said.

The combination of higher logistics costs, rising property expenses and more complex construction contracts points to a tougher operating environment for companies that rely on distribution networks. For businesses already preserving cash, caution now extends beyond finance teams to procurement, real estate decisions and project delivery.

Prime industrial rents of up to $500 per square metre in Sydney and warehouse build costs of up to $2,900 per square metre for freezer facilities illustrate how sharply supply chain infrastructure costs have risen.