Australia’s cost-of-living crisis has deepened, with inflation reaching its highest level since 1990, official figures reveal.
Consumer prices rose 7.3 per cent year-on-year over the September quarter, with soaring inflation in essential goods like groceries and gas heaping more pressure onto household budgets heading into Christmas.
The Australian Bureau of Statistics said prices were rising at the fastest rate in more than three decades in annual terms, underlining a serious challenge for the Reserve Bank as it increases interest rates.
“This quarter’s increase matches that of last quarter and is lower than the 2.1 per cent result in March quarter this year,” ABS prices manager Michelle Marquardt said on Wednesday.
“All three results exceed any other quarterly results since the introduction of the goods and services tax.”
A huge 9 per cent rise in food and non-alcoholic beverages prices year-on-year and a 10.9 per cent spike in prices for gas and household fuels were among the most painful revelations in Wednesday’s inflation data.
But households were saved the worst of skyrocketing electricity costs as state government subsidies stepped in to take the sting out of budgets.
“Electricity rose 3.2 per cent this quarter, with rises across the country offset by the Western Australian Government’s $400 electricity credit, and smaller credits offered by the Queensland and Australian Capital Territory governments,” Ms Marquardt said.
“Excluding the effect of these schemes, electricity would have risen 15.6 per cent in the quarter.”
Furniture prices also rose 6.6 per cent in annual terms as higher freight and labour costs weighed on manufacturers and retailers, the ABS said.
‘Keeps us awake’
Addressing the National Press Club on Wednesday, Treasurer Jim Chalmers said Labor felt for those doing it tough, but had to be careful not to add extra inflationary pressure with any cost-of-living relief in Tuesday’s federal budget.
Dr Chalmers said balancing support measures with the extraordinary level of inflation was a tough act.
“That temptation becomes a lot stronger when you see people hurting … as a Labor government, as Labor people, we feel that, we care about that, it keeps us awake,” he said.
“Whether it’s food, whether it’s electricity, whether it’s rent, inflation is public enemy number one, inflation is the dragon we need to slay.”
Inflation yet to peak
Wednesday’s inflation data is painful reading for households, but things are likely to get worse, with the annual consumer price index predicted to peak at 7.75 per cent over the December quarter.
Underlying inflation – which strips out volatile movements in prices – is now 6.1 per cent, more than double the middle point of RBA targets. That suggests there are further interest rate rises on the horizon.
Making matters worse, wage growth is expected to reach only 3.75 per cent annually over the next 10 months, according to Treasury forecasts published in the federal budget on Tuesday night.
That means real wage growth, which measures consumer purchasing power, is likely to fall by 2 per cent or more in the next six months.
BIS Oxford senior economist Sean Langcake said the “brisk” pace of inflation in essential goods such as gas, electricity and groceries meant that real incomes had been “squeezed” over the third quarter.
“Inflation remains uncomfortably high for the Reserve Bank, but they have already tightened conditions materially, which will temper demand-driven inflation in 2023,” he said in a statement.
“We continue to expect a further 50-basis points of tightening before the RBA pauses to gauge how the economy is tracking.”