Pricier fruit and vegetables helped maintain Australia’s inflation rate at about 7% over the past few months, while modest fuel price increases moderated the pace of growth, the Australian Bureau of Statistics has said.
Consumer prices rose 7% in the year to July with the rate easing to 6.8% to August, according to data released by the ABS on Thursday. Those rates compared with a 6.8% increase in June alone and a 6.1% jump for the June quarter.
The ABS's new monthly CPI figures show inflation in July was 7% and then eased back at to annual rate of 6.8% in August. pic.twitter.com/pWbXOPIJfJ
— Peter Hannam (@p_hannam) September 29, 2022
The release of the inflation numbers comes ahead of the Reserve Bank of Australia board meeting on Tuesday. Prior to the CPI numbers, investors were rating the odds of a fifth rise of 50 basis points in the cash rate in as many meetings as 75%.
The ABS introduced the monthly CPI to give the RBA and governments an earlier warning on how prices are tracking after the sudden pick-up in inflation this year. The next quarterly CPI figures are not due until 26 October – a day after the federal treasurer, Jim Chalmers, is expected to releases his first budget.
“The largest contributors, in the 12 months to August, were new dwelling construction, up 20.7%, and automotive fuel, up 15%,” the ABS’s Australian statistician, David Gruen, said.
“The slight fall in the annual inflation rate from July to August was mainly due to a decrease in prices for automotive fuel,” Gruen said. “This saw the annual movement for automotive fuel fall from 43.3% in June to 15% in August.”
Some of that decline, though, will be reversed in the coming months following the end of a six-month “fuel excise holiday”. The halving of the excise saved motorists about 22 cents a litre as part of the Morrison government’s pre-election pitch to voters. The new excise, including inflation, will add about 24c per litre to fuel prices.
Food and non-alcoholic beverage prices, meanwhile, rose 9.3% in the year to August, while fruit and vegetables were 18.6% higher, providing one of the main drivers of inflation, the ABS said.
Excluding the more volatile items - fruit and vegetables and fuel - the monthly CPI indicator was up 5.5% in June before accelerating to 6.2% in August, Gruen said.
Separately, the ABS said job vacancies in the three months to August fell 2.1%, or about 10,000 to 470,900.
Job vacancies eased 2.1% in the three months to August but remain more than double the pre-pandemic levels, the ABS said. pic.twitter.com/yVaPiGnFE7
— Peter Hannam (@p_hannam) September 29, 2022
The vacancy drop came entirely in the private sector, which saw vacancies fall 3.3% from May to 425,500. Public sector vacancies increased 10.5%, however, to 45,300.
Catherine Birch, a senior economist at ANZ, said the inflation and job vacancy data reinforced her bank’s expectation that the RBA would lift its cash rate by half a percentage point on Tuesday to 2.85%.
“A 2.1% quarter-on-quarter decline in August barely made a dent in the extraordinarily high number of job vacancies,” Birch said. “There is still almost one job vacancy per unemployed person in Australia, and WA was the only mainland state to see a reduction in vacancies.”
On inflation, Birch said the figures showed an acceleration in the prices from 5.5% in June to 6.2% in August, once the more volatile changes were stripped out.
However, Gareth Aird, the head of economics at CBA, said inflation figures were marginally above his bank’s forecast but price rises should slow considerably in 2023 – particularly as supply disruptions in the wake of the pandemic start to ease.
“The upshot is that Australia’s inflation ‘problem’ is not getting worse,” Aird said. “Indeed things will improve from here as the lagged impact of rate hike slows domestic demand growth in the economy.
“We stick with our call for the RBA to slow the pace of tightening at the October board meeting and to raise the cash rate by a ‘business as usual’ 25 basis points, which would take the cash rate to 2.60%,” he said.
