Al-anwar Newspaper English news in Australia
Not since MC Hammer was top of the pops has inflation been so rampant, with a growing sense that U Can’t Touch This or that in the fresh food aisles without breaking the household budget.
Not since MC Hammer was top of the pops has inflation been so rampant, with a growing sense that U Can’t Touch This or that in the fresh food aisles of the supermarket without breaking the household budget.
Economists said the “red hot” rate of cost increases made another big interest rate hike a sure thing next week.
The Australian Bureau of Statistics’ Consumer Price Index for the year to June, published Wednesday, revealed the overall inflation rate had surged to 6.1 per cent, up from 5.1 per cent three months ago.
That’s the highest rate since 1990, outside the one-off impact of the GST’s introduction a decade later.
The cost surge is mainly due to supply shortages caused by the war in Ukraine, China’s zero-Covid strategy and widespread flooding on Australia’s east coast, although strong demand is also a factor.
The CPI data for Sydney showed the price of vegetables rose nearly 16 per cent year on year.
Breakfast cereal increased by close to 9 per cent, as did beef, while lamb added seven per cent.
But the pain was far from confined to groceries, with fuel up 29 per cent even after the 24 cents a litre cut in tax, which will come to an end in September. The RBA has said it expects inflation to reach 7 per cent later this year, before falling.
Its goal is to reduce inflation to between 2 and 3 per cent as soon as possible.
The RBA’s preferred measure of inflation, the less volatile “trimmed mean”, rose by 1.5 percentage points in the June quarter for an annual rate of 4.9 per cent.School costs went up substantially, yet again, as did pet expenses and holidays.
The price of four-fifths of everything the ABS tracks rose faster than most people’s wages.
The cost of essential goods and services jumped 7.8 per cent – nearly double the rate of “discretionary” items.
There was some relief on childcare, which was down nearly 8 per cent, after the then Coalition government increased subsidies in March.
Economists and money markets are now increasingly certain that the Reserve Bank of Australia will raise official interest rates by a further 0.5 percentage points (or more) on Tuesday.
“There are no two ways about it,” CBA economist Gareth Aird said.
“Inflation is red hot 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 August board meeting next week,” he said.
The RBA has already hiked by 1.25 percentage points since May – the most rapid pace in its history – as it attempts to bring inflation under control.
RBA Governor Philip Lowe has said the central bank expects inflation to reach 7 per cent later this year, before falling.
It wants to lower the pace of cost increases to between 2 per cent and 3 per cent as quickly as possible.
Moody’s economist Harry Murphy Cruise said the CPI figures made the situation confronting the RBA even tougher.
“Prices are rising at the same time that confidence is falling, and global growth projections are being revised lower,” Mr Murphy Cruise said.
“But with unemployment exceptionally low, the RBA has a little extra wriggle room to keep fighting inflation.
“That will see the central bank again lift rates next week. We’ve pencilled in another 50-basis point rise.”
The ABS does not track cost movements outside of capital cities. Federal Treasurer Jim Chalmers on Wednesday indicated the ABS may soon provide monthly CPI updates, in line with what happens in many comparable nations.
On Thursday he will reveal new economic forecasts. Growth will be downgraded and the outlook for inflation will be revised up.
