Inflation keeps its grip as CPI rises again

And with the Reserve Bank of Australia predicting inflation to peak at around 8 per cent in the December figures, the prospect of further rate rises seems inevitable.

Goldman Sachs, National Australia Bank, ANZ, UBS and Capital Economics all reaffirmed their calls for further rate rises in the months ahead.

“The continued strength in inflation coupled with the resilience in consumption will prompt the RBA to keep hiking rates for a while yet,” said Marcel Thieliant, senior economist at Capital Economics.

While there was a slight dip in the CPI in October, down to 6.9 per cent, the latest data from the Australian Bureau of Statistics (ABS) shows inflation has once again surged at the end of 2022, with the most significant contributors being housing (+9.6 per cent), food and non-alcoholic beverages (+9.4 per cent), transport (+9.0 per cent), furniture, household equipment and services (+8.4 per cent), and recreation and culture (+5.8 per cent).

Michelle Marquardt, ABS head of prices statistics, said high labour and material costs contributed to the annual rise in new dwelling prices (+17.9 per cent), although the rate of price growth for new dwellings has eased compared to the 20.4 per cent annual rise seen in October.

Prices for all food and non-alcoholic beverages categories remained elevated compared to November 2021. Meals out and takeaway food (+7.3 per cent) was the main contributor to the annual increase. Ms Marquardt said increasing operating costs, including wages, electricity, and weather-affected reductions in food supplies continued to drive prices up.

“In the transport group, we saw some flow-on impact from the restoration of the Australian government’s fuel excise in November’s higher automotive fuel prices,” she said.

“These rose 16.6 per cent in the year to November up from 11.8 per cent in October. Average prices for unleaded petrol peaked at just over $2 in early November before falling to just under $1.80 by the end of November.”

Furniture, household equipment and services group rose 8.4 per cent for the year. This was primarily due to increases in prices for furniture, which occurred in mid-2022 due to higher freight and raw materials costs. Increases in the costs for cleaning and maintenance products were also a strong contributor to the increase for this group.

Prices related to recreational and cultural activities have also increased compared to a year ago. There have been several strong annual movements in holiday travel and accommodation during 2022 as prices recover from COVID-19-related lows. November’s annual movement of 12.8 per cent was the second-highest since the monthly CPI indicator data series began in September 2018.

Ms Marquardt said: “November’s monthly increase of 4.3 per cent for holiday travel and accommodation departs from the falls usually seen in November following the September and October school holiday period. High jet fuel prices combined with strong consumer demand in November pushed airfare prices up, with accommodation prices also rising.”

Treasurer Jim Chalmers said the rising CPI figure is evidence of the pressures being felt throughout the economy and the pinch being felt by households. “Even after inflation peaks in our economy, we need to remain vigilant to the global economic pressures that will continue to impact us for some time to come,” Dr Chalmers said.