PRICING IN AUSTRALIAN MANUFACTURING

The rate of change of prices of competing foreign products and the rate of change of costs of domestic production are both found to have positive impact on the rate of domestic price inflation in a cross section of Australian manufacturing industries over the period from 1968-69 to 1986-87. Prices of competing foreign products are found to have more impact, while production costs are found to have less impact, the higher is the level of domestic concentration, supporting the hypothesis that foreign and domestic competition have interactive effects on domestic prices.