Petrol, construction costs push inflation up to a ‘confronting’ 6.1 per cent - Sydney Morning Herald

Inflation across Australia has increased to 6.1 per cent through the past 12 months as high construction and petrol prices continue to squeeze the nation’s consumers.

The Australian Bureau of Statistics on Wednesday reported that in the June quarter, the consumer price index increased by 1.8 per cent. That followed a 2.1 per cent lift through the first three months.

Rising petrol prices have contributed to inflation hitting 6.1 per cent.Credit:Steven Siewert

The result was slightly below market and economists’ expectations but means inflation still remains at its highest level in 20 years.

But in a worry for the Reserve Bank, the key measures of underlying inflation – which strip out one-off price increases – both jumped above 4 per cent.

The result keeps pressure on the Reserve Bank board, which meets on Tuesday, to consider a third successive 0.5 percentage point interest rate increase. That would take the official cash rate to 1.85 per cent, its highest level since 2016.

Treasurer Jim Chalmers says the government is not surprised to see inflation rise over 6 per cent, but it was confronting.

“It’s not news to millions of Australians who feel this inflation challenge every time they go to the supermarket, and every time their bills arrive,” he said.

“This inflation outcome today, mirrors, the lived experience of Australians who are doing a tough.”

Inflation rose 1.8 per cent in the June quarter and 6.1 per cent through the year, the largest annual increase since the introduction of the GST in 2001.

“These are confronting numbers when it comes to the cost of living pressures that Australians in every corner of our country are feeling that inflation is high and rising,” Chalmers said.

Higher petrol prices helped drive up the price index in the last three months despite the cut to the fuel tax. A rise in new building (up 5.6 per cent) and fuel costs (up 4.2 per cent) were the most significant drivers of inflation over the three months to the end of June, ABS head of prices statistics Michelle Marquardt said.

Over the last 12 months, the cost of new dwellings and fuel have increased by 20.3 per cent and 32.1 per cent respectively.

“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,” she said.

“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.”

Food prices also rose, driven by higher vegetable costs (up 7.3 per cent), and pricier fruit (up 3.7 per cent).

“The annual rise in the CPI is the largest since the introduction of the goods and services tax,” Marquardt said.

Treasurer Jim Chalmers said the inflation figures were “confronting”.Credit:James Brickwood

Chalmers will deliver an economic statement to parliament on Thursday, and the treasurer says this too will be confronting, showing how higher inflation and interest rates and slowing global growth will affect Australia’s economy.

“It will be primarily focused on the economic forecasts rather than the budget forecasts,” he said.

The statement will include forecasts for inflation, wages growth, economic growth, and unemployment.

“It will be confronting in the sense that what you can expect to see in the ministerial statement tomorrow is inflation revised up substantially, growth revised down and all of the implications that that brings,” Chalmers said.

“I wanted to make sure that Australians understood and understand the circumstances as we expect them to be over the coming years so that they can understand the types of decisions that might be made necessary by those economic conditions.”

Forecasts for inflation show it will peak towards the end of the year and moderate into 2023, Chalmers said, but it will be moderating “off an incredibly high base”.

“It will take some time to get to more normal levels of inflation,” he said, adding energy security and oil prices were playing a role in keeping inflation high around the world.

The treasurer says workers can expect real wage growth in this term of parliament, but they shouldn’t expect wages to match inflation in the next few months.

“We’ve got inflation already north of 6 per cent. We expect it to get higher,” he said. “The idea that we will be forecasting wages growth that keeps up with that, I think will not be credible in the near term.”

Chalmers said when it comes to easing cost of living pressures the government had a difficult path to navigate.

“It is not possible with our budget constraints to fund every good idea that people might have about cost of living relief,” he said.

Shadow treasurer Angus Taylor said the government has no plan to deal with cost of living.

“Labor went to the election promising to ease the cost of living, reduce electricity costs and increase real wages but it’s only getting harder for Australian households and the government has offered no real plan to address these challenges,” he said.

Opposition finance spokeswoman Jane Hume said the report from the International Monetary Fund published late last night that showed there was a risk of global recession meant the government needed to act now.

Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.

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2022-07-27 02:33:55Z
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