Inflation surge: huge differences in rises and even a few falls

Households hit by high inflation have received respite in a few key areas, new Australian Bureau of Statistics data shows.

“Everything is going up” is the feeling among Aussie households as food, fuel, utilities, mortgages and rents rise quickly, but it’s not entirely true.

Despite annual inflation rising 7.8 per cent in 2022 – a 33-year high, according to the Australian Bureau of Statistics – there have been pockets of positivity with prices, and in some cases costs have fallen.

A News Corp Australia analysis of new Consumer Price Index data examining almost 100 different product categories has found fats and oils rose the most in 2022, up 21 per cent, followed by domestic holiday costs climbing 20 per cent, and pets and pet products up 19 per cent.

A collection of staple foods also made the top 10 rises, with milk prices up 18 per cent, breakfast cereals up 15 per cent, cheese up 14 per cent and fruit and bread both rising 13 per cent.

However, child care prices fell 2 per cent, book prices were down 0.8 per cent and children’s footwear costs dropped 0.4 per cent.

AMP chief economist Shane Oliver said there was always a variation in CPI categories, but it was greater at the moment because of specific supply impacts such as recent floods affecting food production.

“The dairy area was significantly affected by the floods,” Dr Oliver said.

Gas prices surged 17 per cent in 2022 following Russia’s invasion of Ukraine, and while US gas prices had recently dropped sharply, Australian prices remained high, he said.

“There’s some concern that the government price caps have led to a reduced supply of gas, and it’s maybe having a perverse effect there.”

Child care’s 2 per cent price fall might reflect lower demand – particularly in CBDs – as more people worked from home, Dr Oliver said.

He said Australia’s inflation rate had peaked and “it’s probably going to fall down to 4 per cent, possibly a bit less, by the end of this year”.

“Some things that drove the rise in inflation will start to drop out, and we are in a slowing economy – businesses will be more inclined to discount to keep sales going.”

The Reserve Bank of Australia has been increasing interest rates since May 2022 in an effort to get inflation back within its 2-3 per cent target range.

BetaShares chief economist David Bassanese said supply squeezes affected several products but other issues were at play too.

“It’s also strong demand seeing businesses pass on cost increases easily,” he said.

Inflation had peaked, Mr Bassanese said.

“I think we have probably seen the worst, but the annual rate is going to look high for a while,” he said.

“To get ongoing inflation, you need to have prices continue going up as fast as they have gone up … prices may stay high, but not keep going up.

“If food prices level off or drop, the rate of inflation comes down.”

Areas where price increases were weak in 2022 included audio visual and computer equipment (up just 0.4 per cent), water and sewerage costs (up 0.5 per cent) and telecommunications services and equipment (up 1 per cent).

Mr Bassanese said electronics prices often fell as computer speeds increased.

Torey Mowbray has shopping around more to fight higher food prices. Picture: Matt Loxton

FRUIT PRICE SURGE NOT SO SWEET

AS A vegetarian, Torey Mowbray has felt the recent sharp increase in fruit prices more than most.

The 29-year-old said food shopping had “always been fairly cheap, being a non-meat eater”, but that changed in 2022 with fruit among the 10 fastest-rising product categories in the Consumer Price Index.

Ms Mowbray said she had “definitely noticed” the higher prices and had been shopping around and buying fruit that did not look the prettiest.

“I’m a young person and we are saving to buy a home, so every little bit of money counts,” she said.

“We have been a little more mindful about making sure we buy only what we need for the week, and planning our week’s meals more rather than buying a bit of everything and hoping that we use it all.”

Ms Mowbray said she had always been conscious about buying Australian fruit, but had recently noticed that fruit from overseas was cheaper than local produce.

Originally published as Inflation surge: huge differences in rises and even a few falls