CPI up 5%, in highest rise since GST came in

By Tom Ravlic

April 29, 2022

Josh Frydenberg
Treasurer Josh Frydenberg. (AAP Image/James Ross)

The Coalition government and the federal opposition have clashed over who is to blame for the current economic conditions that have led to a 5.1% increase in the consumer price index announced by the Australian Bureau of Statistics yesterday.

It is the highest rise in the CPI since the goods and services tax was introduced more than 20 years ago with increases in new dwellings, fuel costs, and tertiary education being contributors to the record inflation figure.

New dwellings rose by 5.7% in the March quarter and fuel costs jumped by 11%. Tertiary education costs increased by 6.3% during the same period.

“Continued shortages of building supplies and labour, heightened freight costs and ongoing strong demand contributed to price rises for newly built dwellings. Fewer grant payments made this quarter from the federal government’s HomeBuilder program and similar state-based housing construction programs also contributed to the rise.” said Michelle Marquardt, the head of prices statistics at the ABS.

“The CPI’s automotive fuel series reached a record level for the third consecutive quarter, with fuel price rises seen across all three months of the March quarter.”

Consumers wondering why the costs of fruit, vegetable and other food items were rising have an explanation in the CPI statistics.

Food group prices increased by 2.8% overall and this is due in part to the rises in a series of costs including transport, fertilisers, and packaging and ingredients.

Pandemic related disruptions also contributed to price hikes, the ABS CPI release said.

Both major political parties used the announcement of the CPI to sharpen their rhetoric in what is week three of the election campaign and needle each other over their competence to manage the economy.

Treasurer Josh Frydenberg told a press conference following the release of the increase in the price index that there were many external factors at play in the figures the ABS released yesterday, with a specific emphasis on fuel costs.

“The single biggest increase was with respect to fuel costs, up 11% in the quarter and 35% higher through the year. This is the single biggest increase in fuel prices since Iraq’s invasion of Kuwait more than 30 years ago, in 1990,” Frydenberg said.

“Australia is not immune from the international pressures driving up inflation. The COVID pandemic has led to major supply chain disruptions, which has seen freight costs increase in some cases by five-fold or more.”

Frydenberg said that the war in Ukraine has led to increases in fuel, commodities and gas prices being felt here. He also said Australia was not alone.

“Internationally, we’re seeing in Canada that inflation is running at 6.7%, in New Zealand at 6.9%, in the United Kingdom at 7%, in the United States at 8.5%,” Frydenberg said.

Shadow treasurer Jim Chalmers used the CPI figure release to focus on government debt, the absence of growth in wages, and the increases in costs of living.

“We’ve got inflation going through the roof as we saw yesterday, we’ve got real wages going backwards, and interest rates are about to rise and this government wants to pretend that they haven’t been in government for the best part of a decade now,” Chalmers told ABC Radio. “This is a government which has an excuse for everything but a plan for nothing.”

Chalmers said that an interest rate increase, which analysts expect to follow 5.1% CPI increase, will be a part of the “triple whammy” of the Coalition government with inflation rising and no increase in wages.

“You think about the impact of that on homeowners. If you’ve got an average loan of about $600,000 every 25 basis point increase costs you about $124 a month,” Chalmers said

The federal opposition also used the release of the CPI figures to launch their economic plan that consists of a plan to implement an internationally agreed minimum taxation requirement on multinationals that is designed to combat global tax evasion, an audit that the opposition said will seek to identify waste in spending, and a plan to increase the public sector headcount as well as cut back on the numbers of consultants used for government work.


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