Australian prices rose 6.1% in the June quarter, the fastest annual pace since 2001, as consumers bought more for everything from fuel to food.
Transportation costs alone rose 13.1% as the price of fuel rose to record levels for the fourth consecutive quarter, with Russia’s invasion of Ukraine in February the latest driver. The cost of new homes also increased by 9% over the previous year.
Data released by the Australian Bureau of Statistics on Wednesday also showed the Reserve Bank’s most watched measure has also accelerated. The trimmed average gauge of inflation rose to 4.9% in the April-June period from 3.7% in the previous three months, fueling expectations of another rate hike when the RBA board meets next tuesday
“There are no two ways about it – inflation is red-hot in Australia at the moment, as it is in many parts of the world, and the RBA will respond by raising the cash rate again at the board meeting in August next week,” said Gareth. Aird, head of economics at CBA.
“Our central scenario for the RBA to raise the cash rate by 50 basis points [to 1.85%] at the August council meeting has not changed,” he said.
There are no two ways about it: inflation is in the red in Australia right now, as it is in many parts of the world, and the RBA will respond by raising the cash rate again at the Board meeting in August next week. Our central scenario for the RBA to raise the cash rate by 50bp at the August Council meeting is unchanged (note that the risk still lies with a larger hike, ie between 50 and 75 bp, although we consider this risk to be low).
Economists had forecast that the headline consumer price index figure for the June quarter would come in at 6.3%. The rate of 6.1% was the highest since the June quarter of 2001. In the March quarter, the CPI was 5.1%.
“Inflation will get worse before it gets better,” Treasurer Jim Chalmers told a news conference, adding that the government assumed inflation would peak “towards the end of this year”.
Prices of non-discretionary goods and services rose by 7.6%, implying that the full impact of the price hikes was greater for essential shopping consumers. Discretionary costs increased by 4%. “The trimmed annual average inflation was the highest since the series began in 2003 and annual goods inflation was the highest since 1987, as the impacts of supply disruptions, rising costs of ‘shipping and other global and domestic inflationary factors flowed through the economy,’ said Michelle Marquardt, head of price statistics at the ABS.
Quarterly, the CPI rose 1.8% compared to 2.1% in the January-March period; both were the highest rates since GST was introduced in 2000.
Fruit and vegetable prices rose by almost 6% in the June quarter alone, driven in part by shortages caused by heavy rains in parts of the east coast.
The rising cost of living was one of the reasons voters dumped the Morrison government in the May 21 election.
While the Albanian government can rightly claim that most of the June quarter took place before it was sworn in, it is likely to come under increasing pressure to ease strains on household and business budgets. So far, it is refusing to extend the six-month halving of 22.1 cents a liter in excise duty on fuel introduced in the final Coalition budget beyond its expiry in September.
Chalmers on Wednesday reiterated his intention to let the excise tax cut expire, saying he did not want to “give people false hope”. The temporary cut cost the budget about $3 billion.
The trimmed average inflation figure came in at 4.9% for the June quarter, or more than economists were tipping. The RBA aims for this to be in the 2-3% range over time. pic.twitter.com/422FuoAfLL
— Peter Hannam (@p_hannam) July 27, 2022
Australia’s inflation rate has tended to lag most of its trading partners. New Zealand posted a pace of 7.3% in the June quarter, also a 32-year high, while the UK and US posted inflation rates of 9% more in June, and the euro zone reached an annual rate of 8.6% during the same month. .