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Inflation in Australia: Annual CPI hits highest since 1990


Annual consumer price index inflation has reached its highest level in more than three decades, according to the latest figures from the Australian Bureau of Statistics.

Commodities accounted for more than three-quarters of last year’s 7.3 percent CPI increase, reflecting high freight costs, supply constraints and continued strong demand.

The CPI rose 1.8 percent in the September 2022 quarter thanks to new housing and gas prices.

“The increase this quarter is in line with last quarter and lower than the 2.1 per cent increase in the March quarter this year,” said ABS price program manager Michelle Marquardt.

“All three results are better than any other quarterly results since the introduction of the Goods and Services Tax and underpin the highest annual CPI growth since 1990.”

The main contribution to growth in the September quarter was made by new residential premises (+3.7 percent), gas (+10.9 percent) and furniture (+6.6 percent).

“Labor shortages in the home construction industry, which have led to higher labor costs, have contributed to the growth in new housing this quarter,” Ms. Marquardt said.

“Continued shortages of materials have increased price pressure.”

But she noted that the rate of growth of prices for new housing decreased compared to the last quarters (+5.6% and +5.7% in June and March).

She said this reflected softening new demand and some easing of supply constraints.

Meanwhile, annual gas price reviews showed higher wholesale prices passed on to consumers.

Electricity was up 3.2 per cent, with the nationwide increase offset by the WA Government’s $400 electricity credit and smaller credits offered by the Queensland and ACT governments.

“Excluding these schemes, electricity would have grown by 15.6 per cent in the quarter,” Ms Marquardt said.

Food prices (+3.2 percent) continued to rise through eating out and takeout (+2.9 percent) due to higher ingredients, wages and transportation costs.

Fruits (+6.6 percent) and vegetables (+2.9 percent) also rose in price due to higher input costs and weather damage.

Motor fuel (-4.3 percent) declined over all three months of the quarter, reflecting lower crude oil prices.

For the second quarter in a row, annual new home price inflation was the highest since 1999, driven by high material and labor costs and strong demand.

“Fewer grant payments from the federal government to HomeBuilder and similar state homebuilding programs compared to the same period last year also contributed to the year-over-year increase,” Ms. Marquardt said.

“Excluding the impact of cuts in grant payments, new dwellings would have recorded annual growth of 17.7 percent.”

BIS Oxford Economics head of macroeconomic forecasting Sean Langkeke said the data was broadly in line with the Reserve Bank of Australia’s expectations, meaning it would have a relatively limited impact on its outlook.

“Inflation remains uncomfortably high for the RBA, but they have already tightened conditions significantly, which will reduce demand-driven inflation in 2023,” he said.

“We continue to expect a further tightening of 50 basis points before the RBA pauses to assess how the economy is tracking.

“Last night’s Budget was quite restrained on the expenditure side and should not add to the inflationary pressures facing the economy.

“Indeed, increased child care and pharmaceutical subsidies will have some upside for measured inflation in 2023.

Originally published as The annual consumer price index was the highest since 1990


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