AU: Inflation down but consumer pain continues

A key price gauge shows cost of living pressures are easing, but the treasurer warns Australia’s inflationary challenge is far from over.

Inflation fell to 6.9 per cent in the year to October after hitting 7.3 per cent in September, according to the monthly consumer price index.

Recently introduced by the Australian Bureau of Statistics to supplement the main quarterly index, the monthly measure of price pressures remains high and well above the two to three per cent inflation range targeted by the central bank.

Trimmed mean inflation declined slightly from an annual pace of 5.4 per cent in September to 5.3 per cent in October.

“This is very elevated and suggests inflation remains broad-based across the economy,” St George economist Jameson Coombs said.

ABS head of prices statistics Michelle Marquardt said a scheduled change to the way the bureau calculated the consumer index in order to reflect shifting spending patterns was partially responsible for the unexpected monthly decline.

Under the old weighting system, the headline inflation reading would have been 7.1 per cent rather than 6.9 per cent, she said.

Mr Coombs added the monthly index was more volatile than the quarterly version and said the monthly slip did not necessarily indicate a changing trend.

“The data, although softer, suggests that the inflation pulse remains strong and that domestic drivers of inflation remain acute,” he said.

Treasurer Jim Chalmers welcomed the slowdown in inflation but warned the recent floods and surging energy costs were yet to impact prices.

“While the slight easing in the indicator in October is welcome, we know there are further price pressures that will drive inflation this quarter,” he said.

Softening prices across some key categories helped pull the index lower as better growing conditions fed into lower inflation for fruit and vegetables.

Prices for the fresh food items increased at an annual rate of 9.4 per cent in October compared to 17.4 per cent in September.

Holiday travel and accommodation prices also moderated sharply, dropping from 12.6 per cent in September to 3.7 per cent annual growth in October after the end of school holidays and peak European and American travel seasons helped pull airfares down.

But the restoration of the full fuel excise appeared in the October reading, which showed automotive fuel prices increased by 11.8 per cent, up from 10.1 per cent in the year to September.

Low vacancy rates also fed into higher rents, which were up 3.5 per cent in October compared to 2.9 per cent in September.

Separate figures from the ABS showed new dwelling approvals continued tracking down in October, falling six per cent over the month after a 8.1 per cent drop in September.

Apartment approvals led the decline, while private-sector houses decreased by only 2.2 per cent.

The bureau also released completed construction work data, which rose 2.2 per cent in the September quarter as the industry continued to work through a significant backlog of work.

After a depressed June quarter reading, residential building activity lifted by 1.3 per cent over the September quarter.

Non-residential building activity increased by 1.1 per cent over the quarter, with activity expected to remain strong due to a sizeable pipeline of new projects.

Tags: No tags

Add a Comment

Your email address will not be published. Required fields are marked *