Cost-of-living pain: inflation rises that have crept up on Australians

Annual inflation has dropped, but look closer at specific price rises over two years and the cost-of-living pain may surprise you.

Buried in Wednesday’s Consumer Price Index inflation announcement are some disturbing numbers that paint a clearer picture of the financial strain many households are experiencing.

Annual CPI has dropped from 6 per cent to 5.4 per cent, but the number was higher than expected – driven by soaring fuel and energy prices in the September quarter.

That’s bad news for mortgage customers and raises the chance of a Melbourne Cup Day rate rise from the Reserve Bank of Australia when it meets on November 7.

It’s also bad news for the two-thirds of Aussies who don’t have a mortgage and may have to wait longer for the financial relief of wages growth catching up to price rises.

While interest rate rises seem to hit like a sledgehammer every time the RBA announces an increase, broader price increases tend to creep up on you, and before long you are paying 20 per cent more for stuff than you did just two years ago.

Automotive fuel prices jumped 7.2 per cent in the September quarter. Picture: AFP

Since inflation everywhere started spiking higher in mid-2021, overall CPI has climbed 13 per cent.

But digging deeper into about 100 different product categories contained in the CPI spreadsheets shows average costs across capital cities are much higher for many key household goods and services.

For many, these fastest-rising expenses are their biggest monthly outlays after housing.

Leading the charge is automotive fuel, up 7.2 per cent in the September quarter and 36 per cent since June 2021. Sadly, there is potential for more petrol pain if war in the Middle East intensifies.

Since August 31 crude oil has surged from $US82 a barrel to almost $US94 a barrel, before dropping back again in volatile trading. High oil prices not only fuel petrol pump pain, but also push up transport costs for a wide range of industries including retail and agriculture.

Gas prices have soared 36 per cent too in the two-year period, and electricity 18 per cent – with almost all of that coming in the past year. More is on the way after many electricity retailers jacked up prices by 20-30 per cent from July 1.

Supermarket shopping costs many households hundreds of dollars a week, and several staples have had price rises above 20 per cent since June 2021 – including milk, cheese, bread, eggs, cereals and ice cream.

Insurance costs are up 15 per cent in the past year and 21 per cent in the past two years. Premium rises are forecast to continue climbing at least until the next financial year as big insurers have been losing money.

Rising demand for post-pandemic travel has pushed domestic holiday prices up 20 per cent and international holidays up 25 per cent in just two years, and Qantas flagged more airfare rises last week because of high oil prices.

However, it’s not all gloom. Dental and medical costs have only seen slight rises over two years, electronics and telecommunication prices rarely rise, education cost increases have been contained, and wine rose just 2.5 per cent.

The CPI price rises are nowhere near the 60 per cent increase that variable rate mortgages have hit borrowers with since May 2022.

And as economists warn that the latest CPI increase makes a November RBA rate rise more likely, there appears to be more money pain looming on that front too.

Dairy goods have had some of the biggest price rises over two years. Picture: iStock

GOING UP

Automotive fuel up 36%

Gas 36%

Oils and fats 34%

Cheese 27%

International holidays 25%

Pet products 24%

Bread 24%

Milk 23%

Motor vehicle spare parts 23%

Ice cream 22%

Insurance 21%

Breakfast cereals 20%

Eggs 20%

Domestic holidays 20%

Carpets and floor coverings 19%

Cleaning and maintenance products 19%

Electricity 18%

Source: Consumer Price Index, June 2021 to September 2023

Originally published as Cost-of-living pain: inflation rises that have crept up on Australians