Economy

Rise in core inflation running at highest level in three decades

Wed 27 Jul 22, 1:57pm (AEST)
Inflation
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Key Points

  • In the June quarter Australia’s CPI rose 1.5% to 6.1%
  • The rise in the June quarter CPI were new dwelling prices which rose 20.3% following the withdrawal of government support, while petrol prices soared 32%
  • Treasurer Jim Chalmers highlighted inflation growing at twice the rate of wages in the coming year

While headline inflation is below consensus forecasts, the latest consumer price index (CPI) data released today reveals a 4.9% jump in core inflation in the past 12 months, ahead of consensus forecasts of a 4.7%.

In the June quarter Australia’s CPI rose 1.5% to 6.1%, compared with the previous year - following a 5.1% increase in the first quarter – and slightly below the market consensus of 6.3% through the year. 

On a quarterly basis consumer prices were up 1.8% against a forecasted rise 1.9%, following a gain of 2.1% in the March quarter.

Today’s revelation that inflation had risen to 6.1% is expected to set the tone for the next Reserve Bank (RBA) rate hike in August.

New dwellings and fuel

Driving the rise in the June quarter CPI were new dwelling prices which rose 20.3% following the withdrawal of government support, while petrol prices soared 32%.

The ABS notes, fewer grant payments made in the quarter from the government's HomeBuilder program, plus similar state-based housing construction programs also contributed to the rise.

"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," the ABS noted.

"The CPI's automotive fuel series reached a record level for the fourth consecutive quarter."

Non-discretionary inflation, including expenses such as food, petrol, housing and health costs, was up 7.8% in the year, while fruit and vegetables prices rose 5.8%.

Aussie dollar falls

In response to today’s inflation numbers the A$ fell to US69.37¢ from US69.52¢ while government bond yields pulled back.

The three-year yield slipped to 3.07% from 3.13%, and the 10-year also pulled back to 3.34% from 3.38%.

Twice the speed of wages

Commenting in parliament ahead of today’s CPI data, treasurer Jim Chalmers highlighted inflation growth which is now twice the rate of wages in the coming year.

Today’s inflation numbers also coincide with a decision by the International Monetary Fund (IMF) overnight to downgrade its outlook for the global economy for the second time in three months.

The IMF is now forecasting growth of 3.2% this year and 2.9% next year, 0.4 and 0.7 percentage points lower from April’s forecast.

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Source: Australian Bureau of Statistics

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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