Treasurer Jim Chalmers has said Australia’s inflation is at a “historical” high but believes it is “likely the peak” after it was revealed the Consumer Price Index rose for the fourth consecutive quarter.
The official measure for household inflation has officially risen by 1.9 per cent since September.
While the increase was expected, December’s quarterly figures reflected a year-on-year change of 7.8 per cent – the biggest annual leap since 1990. The CPI is also considerably higher than the Reserve Bank of Australia’s target range of 2 to 3 per cent.
“This is very high inflation by historical standards,” Dr Chalmers said on Wednesday.
“There’s no use pretending otherwise. It’s unacceptably high.”
Dr Chalmers said issues like workforce shortages, the cost of energy, supply chain pressures, and the impact of natural disasters had all contributed to rising inflation.
In response, he said the government’s economic plan was to “make the budget more responsible, the economy more resilient and to provide cost-of-living relief without adding the inflation”.
“These were the priorities in the October budget, and these will be the priorities for the May budget as well,” he said.
Energy market interventions working
Dr Chalmers also addresses the issue of the increasing cost of energy, with electricity costs rising by 8.6 per cent compared to the September quarter.
He said while the government’s Energy Price Relief Plan put temporary price caps on gas and coal, it will “take a little bit of time” for the effects on the energy market to flow through.
However, early indications showed the interventions were working.
“We are really quite pleased and quite encouraged to see some early evidence that our energy plan will moderate some of these energy price increases that we expected in 2023,” he said.
“Obviously on top of that, there is electricity bill relief coming in the budget as well, and that’s an important part of our energy plan as well, to help people through a period of high and rising energy prices.”
Travel, takeaway, eating at restaurants more expensive
Food and non-alcoholic beverages also reflected a year-on-year change of 9.2 per cent, including a 2.1 per cent rise in costs for ‘meals out and takeaway food’. The ABS said this was evident of eateries passing on “rising costs for inputs including ingredients and labour”.
While prices for fruits and vegetables actually saw a drop of 7.3 per cent since the September quarter, costs are still higher than what was reported in December 2022.
While Dr Chalmers said the cost came in “lower than many people expected,” he admitted food costs were a key concern for families.
The other most significant increases in prices were seen in holiday travel and accommodation within Australia (13.3 per cent) and international holiday travel and accommodation (7.6 per cent).
The Australian Bureau of Statistics’ head of prices statistics Michelle Marquardt said “strong demand” over the Christmas period contributed to the rising cost of travel.
Inflation likely at peak
Dr Chalmers said Wednesday’s record inflation is likely to be the “peak” but conceded he could not confirm whether this is definitely the case until numbers are revealed for the current quarter.
The Treasurer warned inflation would remain “higher than we would like for longer than we’d like”, and would be the “defining challenge” in the economy this year, as it was in 2022.
“We are optimistic about the future of our economy and the future of our country,” he said.
“But we are realistic about the extreme price pressures that Australians are facing right now, the impact of interest rates hikes, and the costs and consequences of a war in Europe and a period of substantial volatility in the global economy as well.”