Australian Inflation Rises Driven by High Electricity Bills and Housing Costs
Recent data reveals that inflation in Australia has been significantly influenced by surging electricity costs and housing expenses. The latest Consumer Price Index (CPI) figures indicate a flat inflation rate of 3.8% as of January, with a trimmed mean slightly rising to 3.4%. However, the steep rise in housing inflation, now at 6.8% year-on-year, has raised alarms among economists.
Key Contributors to Inflation
Housing holds a substantial 21.4% weight in the overall CPI basket. It contributed a noteworthy 1.4476 percentage points to the total inflation rate of 3.8%. In stark contrast, just six months prior, housing’s contribution was only 0.3346 percentage points. This marked growth highlights the current strain on housing costs.
Electricity Costs Surge
Electricity costs have also seen a drastic increase of 32.2% within the last year, escalating from a previous 21.5%. Much of this upward trend is attributed to the phasing out of government electricity rebates. Louis Christopher, managing director of SQM Research, noted that the impact of these rebates has begun to wane, with Queensland and Western Australia still retaining some benefits as of January.
Other Influencing Factors
- Food and non-alcoholic beverages inflation stands at 3.1%, significantly lower than the overall CPI.
- New dwelling prices increased by 3.5%, while rents also rose by 3.9%, making them the second-largest contributor within the housing category.
As vacancy rates remain low, landlords are likely to transfer any increased costs onto tenants. This situation creates a cycle that perpetuates rising rents and overall inflation.
Outlook for Future Rate Hikes
Economic analysts, including Compare the Market’s David Koch, suggest that inflation appears to be ‘baked in.’ Homeowners should prepare for potential interest rate hikes later this year. However, the Reserve Bank is anticipated to delay any immediate changes, waiting for the next quarter’s inflation data to assess prior rate adjustments’ effectiveness.
The ongoing economic environment indicates a challenging road ahead, with housing and electricity costs continuing to exert pressure on inflation.
