Inflation highest in more than 30 years

August 4, 2022 BY

Rising costs of housing costs have contributed to the latest inflation outcome. Photo: JONO SEARLE/AAP IMAGE

Australia has recorded its worst inflation outcome since the introduction of the GST, potentially locking in another interest rate rise by the central bank.

The headline consumer price index rose 1.8 per cent in the June quarter, when the price of a supermarket iceberg lettuce hit $10.

This pushed the annual inflation rate to 6.1 per cent.

“The annual rise in the CPI is the largest since the introduction of the Goods and Services Tax,” Australian Bureau of Statistics head of prices statistics Michelle Marquardt said on Wednesday last week.

The CPI outcome was in line with financial market expectations of a quarterly rise of 1.8 per cent and an annual rate of 6.2 per cent.

But the annual result was higher than the 5.1 per cent logged in the March quarter, which was the fastest pace of annual price growth in 21 years.

Prime Minister Anthony Albanese warned on Tuesday last week the annual number would be higher than in the previous outcome.

“But it is also expected to peak and then to decrease over a period of time,” he told ABC television.

“We’ll be doing our bit to take pressure off working people by addressing things like cheaper childcare, that will have an impact improving their standard of living.”

The inflation outcome was driven by the rising cost of housing, fuel, food and groceries, and furnishings.

The pace of price growth in the food and non-alcoholic beverages segment was two per cent in the quarter and 5.9 per cent over the year.

Automotive fuel rose 32.1 per cent over the year, housing rose nine per cent while furnishings, household equipment and services was up 6.3 per cent.

Inflation is rising all over the world following the outbreak of war in Ukraine on the back of rising commodity and fuel prices.

This in turn is hitting manufacturing and transport and freight costs.

The Reserve Bank of Australia is trying to crack down on domestic price pressures and return inflation to its two to three per cent target range.

Westpac economists think the RBA could steadily lift the cash rate – which was 1.35 per cent last month – to 3.35 per cent by February 2023.