Rising fuel costs are adding additional pressure to businesses already being crippled by ongoing supply constraints.
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The Australian Chamber of Commerce and Industry has warned the surge in oil prices is adding additional strain to the economic recovery, with a number of businesses flagging supply side headwinds will persist for the coming year.
ACCI chief executive Andrew McKellar said whichever political party forms government at the next election will urgently need to implement reforms to assist local manufacturing and resilience within the economy.
Mr McKellar acknowledged the Ukraine crisis and the COVID-19 pandemic highlighted a greater need for domestic reliance when global supply chains are disrupted.
"[The political parties] can't gloss over some of those tough decisions that are going to need to be made in the next term," he said.
"There needs to be a real agenda for reform. We've got to restart productivity growth. We cannot limp along as we have done ... for nearly the past 10 years."
Concerns mounted by the industry body coincide with the quarterly ACCI-Westpac survey on industrial trends, which found manufacturers are facing labour and material shortages not seen since the 1970s oil shock.
Westpac senior economist Andrew Hanlan commented there was an expansion in the sector in the March quarter but noted firms were feeling the pressure from significant cost increases.
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"Despite the more positive results around manufacturing activity, the survey again highlights that manufacturers face considerable pressures from rapidly rising costs and a shortage of labour and materials," he said.
"These pressures intensified further in early 2022."
Mr McKellar said volatility in the global economy had jumped as a result of Russia's invasion in Ukraine and was evident in the oil markets price jitters.
However, flagged a reduction in the fuel excise tax would be a "knee jerk" reaction to an issue outside the control of the Australian government and should be fixing supply bottlenecks which are driving up costs and prices.
"We've got to caution against a knee jerk response on excise versus some longer term solutions," he said.
Mr McKellar also added the pass on of costs to consumers would bump up price inflation and could have serious consequences for the Reserve Bank's timeline in deciding when to hike interest rates.
"We don't want to get into a situation where wages and prices are chasing each other and inevitably seeing the Reserve Bank proceeding with a more rapid and higher up in its rate cycle," he said.
