Soaring inflation offers no reprieve to mortgage holders


Any doubts around the assumption that the Reserve Bank of Australia would ease the throttle on interest rates hikes have all but dissipated with the latest inflation figures released minutes ago.

The Consumer Price Index (CPI) rose 1.8 per cent this quarter, taking the annual figure over the 12 months to the June 2022 quarter to 6.1 per cent.

As the multitude of building company failures attests, the most significant price rises were due to higher dwelling construction costs, and the additional burden of higher automotive fuel prices.

It’s the highest inflation rate since December 1990, when Bob Hawke was prime minister.

The most significant price rises, according to Australian Bureau of Statistics (ABS) data, were new dwelling purchases by owner-occupiers (+5.6 per cent), automotive fuel (+4.2 per cent) and furniture (+7.0 per cent).

While annual CPI inflation increased to 6.1 per cent, annual trimmed mean inflation, which excludes large price rises and falls, increased to 4.9 per cent, the highest since the ABS first published the series in 2003.

The biggest contributor to the CPI rise this quarter was goods, as opposed to services, reflecting high freight costs, supply constraints and prolonged strong demand.

New dwelling prices recorded their largest annual rise since the series commenced in the June 1999 quarter. Price rises continue to be driven by high levels of building construction activity, combined with ongoing shortages of materials and labour.

Fewer payments of government construction grants compared to the previous quarter also contributed to the rise this quarter.  These grants have the effect of reducing out of pocket expenses for new dwelling purchases.

Unwanted records

Michelle Marquardt, Head of Prices Statistics at the ABS, said the quarterly increase of 1.8 per cent was the second-highest since the introduction of the GST, following on from a 2.1 per cent increase last quarter.

“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 CPI’s automotive fuel series reached a record level for the fourth consecutive quarter, with fuel prices rising strongly over May and June, following a fall in April due to the fuel excise cut.”

Annual price inflation for new dwellings is currently the highest recorded “since the series commenced in 1999”, Ms Marquardt added.



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