Inflation hits 7.8% so has it peaked?
The official Consumer Price Index jumped 1.9% in the December 2022 quarter, rising to the highest annual rate of inflation in over 30 years.
The figures were released by the Australian Bureau of Statistics (ABS) today and mark the fourth consecutive quarterly rise greater than any seen since the introduction of GST in 2000.
The annual CPI increase came in at 7.8%, the highest rate seen since 1990. While it didn't hit the Reserve Bank of Australia's expectation of 8%, it does outpace most economists' forecasts.
The increase was primarily driven by increased domestic travel and accommodation (+13.3%), electricity (+8.6%) and international travel and accommodation (+7.6%). While these were to be expected given the time of year, the ABS noted that the increases were notably higher than previous December quarters.
Meanwhile, growth in prices for new dwellings (+1.7%) slowed relative to recent quarters (+3.7%) in September and +5.6% in June) but remained stronger than historic norms.
"Labour and material costs are driving price growth in this area, with signs of material cost pressures easing," says ABS head of price statistics Michelle Marquardt.
"Slowing demand for new dwelling construction was reflected in a lower quarterly rate of inflation for new dwellings this quarter compared with the past five quarters."
Food prices continued to rise, driven by meals out and takeaway foods (+2.1%) as dining establishments pass on rising costs. However, vegetables (-10.2%) partially offset the rise, as the effects of unfavourable weather earlier in the year eased.
"The annual increase for the CPI is the highest since 1990. Annual inflation for goods such as new dwellings and automotive fuel steadied this quarter, however we saw an uptick in inflation for services such as holidays and restaurant meals," Marquardt says.
AMP senior economist Diana Mousina says she expects this will be the peak for inflation in Australia for this cycle.
"The inflation backdrop looks much better at the start of 2023 compared to last year and many inflation indicators are pointing down which should mean that we are very close to the end of the tightening cycle and that the February rate rise should be the last one for this year," she says.
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