AUSTRALIA: Amidst a severe crisis of food grains and energy resources due to the raging Russia-Ukraine conflict, international markets and foreign economies have been highly disoriented, resulting in soaring inflation across several countries.
One of them was Australia, which surged to a 32-year high last quarter as the cost of building materials and gas prices increased manifold. High inflation fanned pressures for an urgent return to stricter rate hikes by the country’s central bank.
Statistical data from the Australian Bureau of Statistics (ABS) on Wednesday revealed that the Consumer Price Index (CPI) shot up 1.8% in the September quarter, surpassing the market forecast of 1.6%.
CPI is an important economic metric that evaluates changes over time in the general level of prices of goods and services that a population acquires, uses, or pays for its consumption.
The annual rate has hit a record high of 7.3%, from a 6.1%, the highest ever since 1990 and almost three times the pace of wage growth. The mean also surged to 1.8% in the quarter, raising the annual pace to 6.1%, again surpassing expected forecasts of 5.6%.
The actual results are bad news for the Reserve Bank of Australia (RBA), which predicted a core inflation peak of 6.0% in the December quarter, with headline inflation topping at 7.75%. According to Capital Economics senior economist Marcel Thieliant, “The end result is that CPI inflation will surpass 8% in Q4.”
‘’The stronger-than-anticipated increase in consumer prices is consistent with our prediction that the RBA will raise interest rates more quickly than most expect,’’ he continued.
Meanwhile, the Australian dollar climbed 0.3% to $0.6412, the highest level in more than two weeks. Australia’s Labor government surrendered to inflation concerns this week by limiting its spending budget for the fiscal year 2022–23, despite calls for more cost-of-living support amid soaring household prices.
Treasurer Jim Chalmers responded to the data, “Whether it’s food, whether it’s electricity, whether it’s rent, inflation is public enemy number one. Inflation is the dragon we need to slay.” Moreover, there are fears of recent flooding across tracts of eastern Australia, which could lead to higher food prices.
“Fresh produce prices are still rising as a result of flooding in important growing regions at the beginning of 2022, and more recent flooding is expected to exacerbate these pressures next quarter,” according to Sean Langcake, head of macroeconomic forecasting at BIS Oxford Economics.
”The prices of takeout and restaurant meals have increased, and higher salary costs are also adding to inflation,” he added.
The CPI report released on Wednesday revealed that food costs were already increasing at an annual rate of 9.0%, with a 3.2% increase just in the third quarter. On Tuesday, the Treasurer, Jim Chalmers, told reporters that skyrocketing power prices were a major concern in particular.
“I’m not going to pretend that we’re not worried about these electricity prices,” he told reporters, blaming the Ukraine crisis for “playing havoc” with energy markets. He also blamed the government’s economic indecision and lack of long-term coherent planning.
“When faced with price increases of this magnitude, any reasonable government… needs to contemplate a broader range of regulatory actions than they might have explored in past years,” he continued.
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