By Millie Muroi
Driving around has become cheaper, but the fun stuff – holidays and recreational activities – are probably setting you back. Not to worry, though: a picnic cheeseboard probably costs you less than it did last year – as long as you’re willing to forgo the fruit.
Latest inflation figures from the Australian Bureau of Statistics paint a mixed picture. While price pressures are easing in most categories in the September quarter, we’re not out of the woods yet as the cost of services continues to burn a hole in our budgets.
Let’s start with the big picture.
Inflation has slowed right down
The annual underlying inflation rate – a core measure of inflation stripping out irregular or temporary price swings – sank from 3.9 per cent in June to 3.5 per cent in September, taking it to the lowest rate since December 2021 and well below the peak of 6.8 per cent in December 2022. That’s in line with the Reserve Bank’s expectations as of August, and closer to the bank’s target range of 2 to 3 per cent.
The Reserve Bank has kept rates on hold at 4.35 per cent since November last year and has a meeting next week.
A drop in petrol prices has helped push the brake on inflation
While petrol prices didn’t factor into underlying inflation, it was one of the biggest reasons annual headline inflation fell from 3.8 per cent in the June quarter to 2.8 per cent in the September quarter.
Over the past year, petrol prices have plunged 6.2 per cent thanks to lower global demand. The ABS said a litre of unleaded petrol in the September quarter set drivers back $1.84, which is 13¢ cheaper than it was during the same period last year.
Brent Crude oil prices were hovering around $71 a barrel on Wednesday, down from $87 a barrel at the end of October last year, and wholesale fuel prices are also lower. That means companies using oil to fuel their processes also benefited from lower costs.
Lower electricity prices also dimmed inflation
The cost of staying warm and keeping the lights on has also dropped. Electricity prices plummeted 17.3 per cent in the September quarter and 15.8 per cent in the past 12 months.
State and federal government rebates were the biggest drivers. Without those, electricity prices would have risen 0.7 per cent in the September quarter.
While electricity prices weren’t counted in the underlying inflation measure, the dramatic drop dragged overall utilities prices down 7.6 per cent, contributing towards a 0.1 percentage point fall in inflation.
It’s cheaper to get around, but more expensive to do the fun stuff
It’s not just cheaper fuel making it easier to zoom around in your car.
Urban transport fares fell 2.1 per cent over the quarter thanks to state and territory government initiatives, including 50¢ fares in Brisbane and free public transport in Canberra as the capital transitions to a new ticketing system.
If you bought a new car, you probably snagged a bargain as motor vehicle prices fell 0.8 per cent.
But recreation and culture were more expensive. International holiday travel and accommodation prices (up 1.9 per cent) took a bite out of jet-setting Australians, especially as demand increased from those taking in Europe’s summer.
Your grocery bill has probably spiked, but your meat board could be cheaper
As long as you’re willing to forgo the strawberries and chocolate, your cheese board might be cheaper than it was last year.
Food prices continued to climb this quarter, with the annual rate staying at 3.3 per cent – the same as it was in June. Fruits and vegetables, especially berries, grapes, tomatoes and capsicum had the biggest price spikes over the year due to poor growing conditions.
Bread prices remained stable, but record-high cocoa prices heated the cost of chocolate, and bird flu has caused shortages in eggs, making them 9.1 per cent more expensive than they were 12 months ago.
Services inflation has stayed sticky, meaning we’re not out of the woods yet
Although the price of goods has dropped from 3.2 per cent in the June quarter to 1.4 per cent this quarter, services inflation, which has remained stubbornly high for some time, continues to be sticky.
In fact, services price growth came in at 4.6 per cent: slightly higher than in the June quarter. In particular, higher prices for rents, insurance, education and medical, dental and hospital services were the main contributors.
Childcare was also more expensive, with prices rising 3.2 per cent over the September quarter as higher operating costs fed into fee increases. Over the past 12 months, childcare costs have soared 12.1 per cent, although it’s still cheaper than it was in June 2023.
While the latest price data might come as some relief, getting inflation firmly within target is still no picnic for the Reserve Bank.
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