The price rises that have hit consumers the hardest

Surging living costs sharpen peoples’ focus on rising prices. See the top 25 biggest increases from the Consumer Price Index.

Dental services are among the biggesr price rises over four decades. Picture: iStock

Inflation has been the biggest force and fear affecting Australians’ finances since 2021, and official statistics show it has been a scarier ride for many consumers for much longer.

Forty years of detailed Consumer Price Index figures from the Australian Bureau of Statistics paint a picture of higher health costs, education, utilities and the biggest losers from inflation’s long march higher: smokers.

Tobacco has by far had the biggest price rises since 1984, up more than 4200 per cent – ten times more inflation than Australians’ other popular vice, alcohol.

KMPG chief economist Brendan Rynne said tobacco costs reflected government policy to heavily tax cigarettes to try to stop people smoking.

“There’s a question of whether that tax has gone too far, to the point that it’s now encouraging black market activity,” Dr Rynne said.

“It’s now cultivated an illegal tobacco trade and that’s causing turf wars as a consequence.”

Heavy taxation has also impacted alcohol prices, but to a lesser extent, with beer and spirit prices rising more than 400 per cent but wine prices up just 133 per cent.

AMP chief economist Shane Oliver said wine’s lower relative rise reflected its increasing affordability.

“We have got more wine production than we have ever had,” he said.

Dr Oliver said he remembered newspaper headlines from decades ago crying “beer and cigs up”.

“They’re both an easy target, he said.

Dr Rynne said it was only in periods of high inflation that people noticed rising prices. “In periods of moderate to low inflation it’s not noticeable – when you have less change in your pocket you start to realise,” he said.

The Consumer Price Index’s second-biggest increase over 40 years – medical and hospital services – reflected the rise of technology and machines to keep people healthier and living longer “but it’s coming at a price”, Dr Rynne said.

“It’s the equivalent of the Monty Python line – you have got the machine that goes ‘bing’,” he said.

“Health has outpaced normal inflation by a long way. What we are paying for is the opportunity to live longer.”

After tobacco, medical expenses have been the fastest-rising costs. Picture: iStock

While rents – up 333 per cent – had climbed slightly more than housing prices – up 326 per cent – this reflected the fact that ABS housing numbers related only to the cost of building and not the cost of land, which had become scarcer, Dr Rynne said.

Dr Oliver said land was removed from CPI in 1988 because it was having a “perverse effect” on data.

“CPI is meant to cover consumption, and you don’t consume land,” he said. “You consume rental services and you consumer building costs. Land is considered an asset – it’s a bit shifty, and you can go around in circles.”

Other big rises in CPI in the past 40 years were education (887 per cent), dental services (522 per cent), utilities (423 per cent) and urban transport fares (394 per cent).

“Services tend to go up more in line with wages,” Dr Oliver said.

“As the economy gets more and more services oriented, it gets harder and harder to keep prices down,” he said.

Some prices have risen very little in 40 years – appliances, household textiles and communication – while computing and telecommunications costs had dropped.

Dr Oliver said the CPI adjusted technology-related prices based on power and quality of goods.

“The computer you have in your phone is probably 1000 times more powerful than the computer you bought in 1984,” he said.

“Computing power has gone up exponentially – we now all have super computers. A lot of it comes down to productivity, and over time the productivity in the tech sector has been phenomenal.”

Several grocery staples had inflation below the overall CPI rise of 277 per cent, including breakfast cereals (187 per cent), poultry (42 per cent), milk (237 per cent), eggs (239 per cent) and tea, coffee and cocoa (138 per cent).

Fruit and vegetable prices have only been included in the CPI since 1989, and since then have climbed 145 per cent.

Originally published as The price rises that have hit consumers the hardest