- Follows a 5.1% annual change during the March quarter
- Comes as the cash rate rose several times during the quarter, and is expected to do so next week
Inflation has reached 6.1%, data from the Australian Bureau of Statistics (ABS) has revealed today.
This follows a 5.1% annual change recorded during the March quarter, then the highest since the GST was introduced by the Howard Government in the early 2000s, now surpassed by todays data.
Inflation rose by 1.8% during the quarter. New dwelling purchases by owner-occupiers recorded the most significant price rises (+5.6%), along with automotive fuel (+4.2) and furniture (+7%) – the latter perhaps due to the new homes.
“Shortages of building supplies and labour, high freight costs and ongoing high levels of construction activity continued to contribute to price rises for newly built dwellings. Fewer grant payments made this quarter from the Federal Government’s HomeBuilder program and similar state-based housing construction programs also contributed to the rise,” said Michelle Marquardt, Head of Prices Statistics at the ABS.
“The CPI’s automotive fuel series reached a record level for the fourth consecutive quarter. Fuel prices rose strongly over May and June, following a fall in April due to the fuel excise cut.”
Recent history of inflation
To put this into perspective, the Reserve Bank’s target range for inflation is 2 to 3%.
Inflation is calculated using the Consumer Price Index (CPI), which is a weighted basket of goods and services across the capital cities. Notably, inflation does not include the purchase of real estate – with the exception of new houses, but not land itself.
The data comes following several months of interest rate rises – with another rise expected next Tuesday.
Inflation has been rampant around the world during the past year thanks to a range of stimuli during the pandemic, along with ongoing supply chain and labour shortages.
Domestically fuel prices have increased, thanks to the conflict in Ukraine. Although there has been a relief in prices recently, the fuel excise is scheduled to revert to its previous level in September, adding about an extra 22 cents per litre for unleaded.
Notably, inflation declined during the early stages of pandemic as demand slumped globally, lowering the price for crude oil. Free child care for many Australian families also lowered the rate of inflation during this time.
Since the introduction of additional child care subsidies for families with two or more children under the age of 6, which began in March, child care costs have decreased by 7.3%.
Since the RBA has tighten rates most property markets have recorded a decline in house prices, for the first since 2020.
Inflation has caused many companies in the property sector to go into administration – the most recent being Caydon, announced yesterday.
Despite the high levels of inflation, unemployment nationally remains at a record-low level of just 3.5% – since the 1970s, this has been a rare occurrence. Most economists calculate the natural rate of unemployment as 5%, highlighting how tight the jobs market is.
Along with being the highest rise in CPI since the GST was introduced, Ms Marquardt noted that annual price inflation for new dwellings is the strongest since the series began in 1999.
“Annual trimmed mean inflation was the highest since the series commenced in 2003 and annual goods inflation was the highest since 1987, as the impacts of supply disruptions, rising shipping costs and other global and domestic inflationary factors flowed through the economy,” she added.
Business Council chief executive Jennifer Westacott said Australia needs to build resilience but taking control of every lever.
“We can’t control inflation driven by events on the other side of the world, but we can manage the bottlenecks and blockages that make the problem worse,” she said.
“Previous changes to child care have helped ease the pressure on some fronts but there is no doubt Australians are hurting.
“Unnecessary friction in the economy is adding to costs and making it harder and more costly for Australians to get things done. We’ve got to shift gears to focus on the little things, because taken together they will help ease the pressure on Australian families.
“Every product that can’t get to shelves because there aren’t enough truck drivers or new homes that takes longer to approve because of unnecessary red tape is making this challenge worse. Every layer of complexity that slows down our ability import or export goods and services, get them through ports or move them around the country adds to household bills.”
