PHARMACY owners are being warned that rising inflation will create a "bumpy [economic] ride" for the sector.
Speaking on the latest edition of the Sirianni Market Update, Medici Capital Managing Director, Frank Sirianni, noted that while the pharmacy sector has traditionally performed strongly in tough economic times, cost pressures driven by inflation will create challenges.
"In terms of pharmacy there are a couple of issues that are relevant," he said.
"One is the cost of goods sold, the second is wages and the third is rent.
"All three of those [costs] will be impacted by inflation and as a consequence we will see a significant increase in some of the underlying costs.
"Those three costs control 90% or more of the expenses for most pharmacies, so from that perspective we're in for a bit of a bumpy ride.
"On the inverse, pharmacy does do very well in these tough economic times, and so from that perspective I think that we might do well out of it.
"There are certainly a number of things on the horizon that are fantastic for pharmacy in economic and professional terms, and that includes what we have seen during the COVID pandemic [including] an extraordinary uplift in pharmacy, particularly in the health services/ professional services areas."
Sirianni noted that the factors currently driving inflation in Australia are external.
"One thing that perplexes me, and other economists, is the fact that the Reserve Bank is trying to use interest rates to, in some way, curb inflation, when most price rises are really outside of our control," he said.
"There's nothing interest rates are going to do to curb the Ukraine War, or supply chain issues.
"Having said that, demand is something that the Reserve Bank and the Government wants to control, and raising interest rates will inevitably lead to a reduction in demand, and that's the hope.
"My only concern is the impact that might have on the economy, by forcing us into a slowdown, a stagnation or indeed a recession of some sort."
The above article was sent to subscribers in Pharmacy Daily's issue from 17 Aug 22
To see the full newsletter, see the embedded issue below or CLICK HERE to download Pharmacy Daily from 17 Aug 22