Australia’s cost of living crisis WORSENS with inflation hitting a new 32-year high – making another interest rate rise within weeks almost a certainty
- Australian inflation has hit new 32-year high of 7.8 per cent
- Highest consumer price index since March quarter of 1990
- Economists expecting another cash rate rise on February 7
Australia’s cost of living crisis has worsened with inflation hitting a new 32-year high of 7.8 per cent.
The consumer price index in the year to December surged at the fastest annual pace since the March quarter of 1990, with Treasurer Jim Chalmers describing it as ‘unacceptably high’.
This means another interest rate rise on February 7 is almost a certainty with headline inflation well above the Reserve Bank’s 2 to 3 per cent target.
Australia’s cost of living crisis has worsened with inflation hitting a new 32-year high (pictured is a Woolworths shopper in Sydney’s eastern suburbs)
The Australian Bureau of Statistics figure, for the December quarter, was slightly less severe than the Reserve Bank’s forecast of 8 per cent, with the CPI rising by 7.3 per cent in the September quarter.
Biggest price rises in 2022
DOMESTIC HOLIDAY COSTS: Up 13.3 per cent
PETROL: Up 13.2 per cent
CEREAL, BREAD: Up 12.2 per cent
HOUSING: Up 10.7 per cent
Housing costs last year climbed by 10.7 per cent as food as non-alcoholic drink prices rose by 9.2 per cent and fruit and vegetable prices increased by 8.5 per cent following flooding on Australia’s east coast in early 2022.
A closer breakdown of grocery items showed a 12.2 per cent annual surge in bread and cereal prices and an even more severe 14.9 per cent climb in dairy prices.
Petrol prices last year climbed by 13.2 per cent, after rising above $2 a litre in March as Russia’s Ukraine invasion led to sanctions that pushed up global crude oil prices.
With state borders open again, domestic holiday costs soared by 13.3 per cent over the year.
Dr Chalmers suggested inflation may have peaked but said it was ‘unacceptably high’.
‘This is very high inflation by historical standards and there’s no use pretending otherwise,’ he said.
‘While inflation is unacceptably high, there are some signs that inflation is likely to have peaked, but we won’t know this for sure until data for the March quarter comes in.
‘This is a defining challenge in 2023.’
Petrol prices last year climbed by 13.2 per cent, after climbing above $2 a litre in March as Russia’s Ukraine invasion led to sanctions that pushed up global crude oil prices (pictured is a Sydney service station)
Home borrowers, since May, have copped eight consecutive monthly rate rises and the big banks are all expecting the Reserve Bank to raise rates again in February by another quarter of a percentage point.
This would take the cash rate to a new 10-year high of 3.35 per cent.
Under this scenario, a borrower with an average $600,000 mortgage would see their monthly repayments rise by $93 to $3,303, up from $3,210.
A couple in Sydney with a $1million home loan would see their repayments surge by $154 to $5,504 from $5,350.
Both increases are based on a Commonwealth Bank variable rising to 5.22 per cent from 4.97 per cent, to reflect the RBA cash rate climbing to 3.35 per cent from 3.1 per cent.
Economists and the Reserve Bank are expecting inflation to moderate from here but remain above the RBA’s 2 to 3 per cent target until 2025.
What another rate rise means
$500,000: Up $77 to $2,752 from $2,675
$600,000: Up $93 to $3,303 from $3,210
$700,000: Up $108 to $3,853 from $3,745
$800,000: Up $123 to $4,403 from $4,280
$900,000: Up $139 to $4,954 from $4,815
$1,000,000: Up $154 to $5,504 from $5,350
Calculations based on a Commonwealth Bank variable loan rising to 5.22 per cent from 4.97 per cent to reflect Reserve Bank of Australia cash rate rising to 3.35 per cent from 3.1 per cent