- New dwelling prices fell by 0.1%
- Schemes such as HomeBuilder were in place during March quarter
- CPI doesn't include land values
Data released by the Australian Bureau of Statistics (ABS) has revealed that the Consumer Price Index (CPI) rose by 0.6% during the March 2021 quarter – less than what was expected.
The small increase was led by automotive fuel which increased by 8.7% over the quarter, medical and hospital services which increased by 1.5% and pharmaceutical products which saw a 5.3% increase due to some changes in safety nets for the Pharmaceutical Benefits Scheme and Medicare changes.
The CPI is essentially a fixed basket of goods and services purchased by household consumers across the eight State and Territory capital cities. The ABS uses this to measure inflation within the Australian economy – it is not designed as a cost of living index.
The quarterly data reveals prices fell for new dwellings – in part due to various government schemes, according to the Head of Prices Statistics at the ABS, Michelle Marquardt.
The fall, however, was a minuscule 0.1%.
“The fall in new dwelling prices was due to the impact of the Federal Government’s HomeBuilder grant and similar grants by the Western Australian and Tasmanian state governments.
“Without the offset from these grants, the price of new dwellings would have risen, reflecting increases in materials and labour prices in response to strong demand.”
Michelle Marquardt, Head of Prices Statistics ABS
Notably, land is excluded when calculating CPI. The ABS argues this is to align CPI with its primary purpose as a macroeconomic indicator by viewing the purchase of land as an investment as opposed to consumption. Globally, statistical standards overseas don’t tend to include land values in inflation.
However, other costs such as building a dwelling are included in CPI calculations – important especially given, according to the ABS, 22% of all spending by Australian households is directed towards housing, with 9% towards the purchase of a new dwelling.
While the December quarter and September 2020 quarters recorded increases of 0.9% and 1.6%, the June quarter recorded a 1.9% decrease, representing an annual decrease of 1.9% – otherwise known as deflation.