The rising cost of fruit and vegetables has helped keep Australia’s inflation rate at its highest level in 30 years, new data has revealed.
The Australian Bureau of Statistics’ new monthly inflation measure showed the pace of price rises hit 7.0% in July before slowing slightly in August, to 6.8%.
Soaring construction costs and fuel prices continue to be the main drivers, but rapidly rising fruit and vegetable prices (up 18.6%) have added to the hip pocket pain.
“The biggest contributors in the 12 months to August were new housing construction, up 20.7%, and motor fuel, up 15%,” Australian statistician David Gruen said.
“The slight decline in the annual inflation rate from July to August was mainly due to a drop in automobile fuel prices.”
Overall, the cost of food and non-alcoholic beverages rose 9.3% in the year ending August.
The release of the data, the first monthly update from the ABS, is designed to give economists and policymakers more regular updates on inflation.
It will officially launch next month, but Dr Gruen said it was a taste of what was to come.
Treasurer Jim Chalmers said there was no ‘sugar coating’ Australians were doing hard.
“The new monthly consumer price data confirms what Australians know every time they pay a bill or visit a store – prices are going up and their wages just aren’t keeping up,” he said.
WHAT DOES THIS MEAN FOR INTEREST RATES?
Although the numbers show that inflation has come down, it will not be enough for the Reserve Bank to rein in rising interest rates.
Over the past five months, the spot rate has risen from 0.1% to 2.35% as part of a series of aggressive rate hikes aimed at curbing inflation.
ANZ chief economist Catherine Birch said Thursday’s figures were unlikely to influence the central bank until its meeting next week.
“Today’s data on vacancies and the monthly indicator does not change our expectation that the RBA will raise the cash rate by 50 basis points,” she said.
“There is still momentum on the inflation front.”
HOUSEHOLD WEALTH IS ALSO FALLING
Australian household wealth plunged for the first time since the start of the pandemic, down $484 billion in the June quarter to $14.4 trillion.
Falling stock and property prices have led Australians to be 3.3% poorer than three months ago.
ABS finance and wealth manager Katherine Keenan said the fall “coincides with rising cost of living pressures and rising interest rates”.
Falling pension balances contributed 1.7 percentage points to the decline in wealth, while a fall in house prices reduced household wealth by 1.1 percentage points.
But it’s not all bad news; super contributions reached $38 billion and household deposits increased 0.5% ($7.4 billion) in the quarter.
The ABS said the numbers reflected “continued strength” in the labor market.