On October 28, 2023, the Consumer Price Index (CPI) data included some concerning figures, offering a clearer picture of the financial pressures many households are currently experiencing. The annual Consumer Price Index has decreased from 6% to 5.4%, primarily due to the sharp rise in fuel and energy prices in the September quarter.
This is bad news for mortgage customers and may increase the likelihood of the Reserve Bank of Australia raising interest rates at its November 7 meeting. For the two-thirds of Australians without mortgages, this is also unwelcome news as it may take them longer to see wage growth catch up with rising prices.
You’ll gradually notice that everyday items are now 20% more expensive than they were two years ago. Since mid-2021, when inflation intensified, the overall Consumer Price Index has risen by 13%. However, delving deeper into about 100 different product categories reveals that the average cost of many essential household goods and services in major Australian cities is even higher.
For many, the fastest-rising expenses are rent, followed by fuel. Gas prices increased by 7.2% in the September quarter and have risen by 36% since June 2021. Unfortunately, if the conflict in the Middle East escalates, gasoline prices may continue to rise. Since August 31, crude oil prices have surged from $82 per barrel to nearly $94 and then retreated in volatile trading.
High oil prices not only lead to rising gasoline prices but also drive up transportation costs for numerous industries, including retail and agriculture. Natural gas prices have also surged by 36% in the past two years, and electricity prices have increased by 18%, with nearly all of this increase occurring in the past year. From July 1, many electricity retailers raised prices by 20% to 30%, and further increases are expected.
Since June 2021, the prices of several major food items have risen by more than 20%, including milk, cheese, bread, eggs, cereals, and ice cream. Insurance costs have increased by 15% in the past year and 21% in the past two years. It is expected that insurance costs will continue to rise into the next fiscal year as major insurance companies face losses.
With increased demand for domestic travel post-pandemic, domestic holiday prices have risen by 20% in just two years, while international holiday prices have increased by 25%. Last week, Qantas announced it would raise ticket prices due to the high cost of fuel.
Compared to the 60% increase in variable-rate mortgages since May 2022, the increase in the Consumer Price Index is far less dramatic. Economists warn that the latest increase in the Consumer Price Index makes it more likely that the Reserve Bank of Australia will raise interest rates in November.
36% increase in gasoline prices
36% increase in natural gas prices
34% increase in oil-based foods
27% increase in cheese prices
25% increase in international holidays
24% increase in pet supplies
24% increase in bread prices
23% increase in milk prices
23% increase in auto parts
22% increase in ice cream prices
21% increase in insurance costs
20% increase in breakfast cereals
20% increase in egg prices
20% increase in domestic holidays
19% increase in carpet and flooring materials
