Inflation explained: What prices are going up and what’s coming down

The tightening rental market, spiralling electricity bills and rising petrol prices all have a part to play in how inflation is resisting the RBA’s offensive.

Inflation is the nasty thorn in the side of all Australians right now and speaks to what we are all feeling: the cost of living is continuing to rise and interest rate hikes don’t appear to be stopping it.

We have dropped from the December 2022 high of 7.8 per cent, despite the Australian Bureau of Statistics (ABS) reporting September’s inflation rate had risen again over the quarter, in the face of the Reserve Bank’s (RBA ) frenzy of rate hikes since May last year in its bid to control it.

Inflation is judged on the price changes consumers are facing for a basket of goods and services over a period of time. But what are they and how much have they increased?

According to the ABS, the prices of goods are well above historical levels, up 1.2 per cent over the September quarter and 4.9 per cent over the year, particularly food, furniture, and housing. Comparisons can be hard to read, given pandemic-fuelled demand increases and supply disruptions a year ago.

Services are the more problematic of the two, rising 1 per cent over the quarter and up 5.8 per cent this year. The RBA is concerned with services because the price is “sticky” given the transition to consumer spend shifting and elevated wages growth.

 

What is going up?

Rent: Tenants are copping a 7.6 per cent increase in prices in 2023 and rents are expected to stay high given the pressure low vacancy rates put on the market. This marks the highest annual rise since 2009. Over the quarter, there was a 2.2 per cent rise, which was “moderated by Commonwealth assistance”.

Electricity bills: Bills jumped 4.2 per cent this quarter off the back of wholesale prices increasing from July. Energy Bill Relief Fund rebates “partially offset” the impact but, annually, the cost is up 14.5 per cent.

Petrol: Fuel rose 7.2 per cent after six months of price falls, marking the largest quarterly rise since March 2022. Average prices for unleaded petrol increased to $1.97 per litre, 13.5 cents per litre higher than the last quarter. The 2023 jump is even more significant at 7.9 per cent, with higher global oil prices blamed for prices. Conflict in the Middle East could mean further hikes.

Dairy: Dairy and related products rose 2.1 per cent, due to elevated farmgate milk prices and other operating costs.

Alcohol and tobacco: Both vices were up due to annual excise indexation, at 1.3 per cent and 1.7 per cent, respectively.

Health: Medical and hospital services were up in September, with the delayed April premium hikes handed down in the quarter. Dental services were up 2.5 per cent this quarter and 4.9 per cent annually.

Construction costs: New dwelling purchases by owner-occupiers were up 1.3 per cent this quarter and 5.2 per cent this year.

Insurance: Rises across home, contents and car insurance pushed the sector to a 2.8 per cent rise over September and an 8.6 per cent jump annually.

Gas: Prices are lower than the March and June quarters, but still 1.4 per cent up in the September reporting period and 15.4 per cent over the year.

Personal services: The cost of hairdressing and repairing clothing were both up – 6.2 per cent and 6.7 per cent, respectively.

Postal services: This year, the cost has risen by 14.2 per cent.

What’s more nuanced?

Fresh food: Fruit and vegetables are down by 6.4 per cent from a year ago after weather impacted supply, but meat prices are up 2.2 per cent. Interestingly, the average Aussie reported a 7 per cent increase in their grocery shop, with the monthly cost hitting $740, according to Finder’s Consumer Sentiment Tracker.

Eating out: The cost of food has risen 4.8 per cent over the year, but this has been driven by people eating out and pricing being impacted by high operating costs. Meals and takeaway meals were up by 2.1 per cent over the quarter.

Cars: Motor vehicle prices were up by 4 per cent this year but down 7 per cent since 2021 when the pandemic caused real issues for car importation and the Aussie manufacturing industry had already died.

Clothing and footwear: Clothing and footwear prices were up by 0.4 per cent over the September quarter, but garments were down by 0.7 per cent over the year.

Household furnishings: Furniture is up by 2.3 per cent compared to last year, but major household appliances are down by 0.6 per cent in the same timeframe.

What’s going down?

Child care: The cost of child care dropped 13.2 per cent this quarter as more Aussies accessed rebates under the Child Care subsidy. This also resulted in a 2.6 per cent fall in pre-school and primary school costs.

Pharmaceuticals: The price of filling a script has dropped by 1.2 per cent because more people could access products under the Pharmaceutical Benefits Scheme.

Travel: The cost of holidaying in Australia dropped by 2.5 per cent, marking a decline for the second quarter. International holidays were up slightly at 0.5 per cent.

 

article from: au.finance.yahoo.com