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Resurgent fuel prices drive CPI to 3.8% annual rise
Australia may still be dealing with the pandemic, but the ABS says that the consumer price index is returning to normal.
Resurgent fuel prices drive CPI to 3.8% annual rise
Australia may still be dealing with the pandemic, but the ABS says that the consumer price index is returning to normal.
According to figures from the Australian Bureau of Statistics, Australia’s consumer price index (CPI) rose 0.8 per cent in the June 2021 quarter.
This brings the annual growth of the measure, which is commonly used to gauge inflation in the economy, to approximately 3.8 per cent.
The CPI measures the rate of inflation in the economy by tracking the shift in cost for a metaphorical basket of goods and services, covering stuff like essential food to housing and medical costs.
According to the ABS, the CPI is “the most comprehensive measure of goods and services price inflation faced by all consumer households”.
In their latest report on Australia’s CPI, the ABS noted that the most significant factor behind the measurement’s most recent movements has been a rise in the cost of automotive fuel.
Michelle Marquardt, head of price statistics at the ABS, said that rising fuel prices “accounted for much of the increase in the June quarter CPI, with prices surpassing pre-pandemic levels”.
Other trends in consumer prices observed in the June 2021 quarter included a rise in private health insurance premiums, which drove the medical and hospital spending higher by 2.4 per cent.
Meanwhile, aggregate electricity prices also jumped upwards 3.3 per cent during this period. The ABS pointed to the unwinding of Western Australia’s $600 electricity credit as a likely culprit.
The ABS also observed a 0.1 per cent fall in the price of new dwellings, attributing the movement to the lingering effects of schemes like the federal government’s HomeBuilder grant and the like.
Finally, the ABS also noted price rises across a range of food items, including vegetables (5.5 per cent), fruit (4.7 per cent) and beef (3.6 per cent). They cited a number of incidents affecting local supply chains as the driving force behind these trends, such as the recent NSW floods.
More broadly, Ms Marquardt maintained and reiterated that “the annual CPI movement was significantly influenced by COVID-19 related price changes from this time last year”.
“Additional context can be gained by comparing the current CPI to pre-pandemic levels in the March 2020 quarter,” she said.
In the six years prior to the pandemic, Australia never moved more than a per cent per quarter.
However, Australia’s CPI recorded the largest quarterly fall in 72 years in June 2020. During this period, it shrank 1.9 per cent.
Harley Dale, chief economist at CreditorWatch, said the Reserve Bank is likely to “look straight through this latest inflation update”.
“This time last year, Australia was in a recession, and in the June quarter we experienced deflation of -1.9 per cent. From this exceptionally low base, we have naturally seen a big rise for this June quarter,” he said.
AI group executive Innes Willox agreed, noting that “while the 3.8 per cent increase in the CPI for the year to the end of June 2021 appears high, it is to a large extent due to the reversal of some deflationary forces of a year ago”.
AMP’s Shane Oliver said that “once base effects and various pandemic distortions are removed, underlying inflation has edged up from the lows around mid-last year but still remains subdued”.
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