Here’s what you need to know from the latest inflation figures

People opening their insurance premium bills or whipping up eggs to hit their daily protein targets are still feeling hip-pocket pain, but the latest price gauge shows inflation is easing faster than economists and the Reserve Bank have been expecting.

Here are the details you need to know from the latest reading by the Australian Bureau of Statistics which showed headline inflation fell to 2.4 per cent in the December quarter, while the closely watched underlying measure slipped to 3.2 per cent.

One Up Building co-owner Rick Simmons says labour shortages are starting to ease.Credit: Wolter Peeters

Boon for bargain hunters as business slows for builders

It’s good news for those looking to buy a new home as builders have been offering discounts and promotional offers to entice customers in a subdued market, according to the ABS.

In the weakest annual rise since the June 2021 quarter, new dwelling building costs climbed 2.9 per cent over the 12 months to the December quarter, down from 4.8 per cent in the September quarter.

While Rick Simmons, co-owner and managing director of bespoke Sydney-based building firm One Up Building, has a steady pipeline of jobs, he has noticed an easing in the number of enquiries in the past six months.

“People are being more considerate of their choices,” he said, adding it was because customers faced high interest rates and stabilised property prices.

Simmons said while building material costs were still climbing, price pressures for most components were stabilising, including workers, who were becoming more available and competitive.

“Sub-traders are becoming more hungry for work and therefore more competitive with their pricing,” he said. “Trying to find extra labour resources was hard for a while, but those companies are now calling me.”

But with rents rising 6.2 per cent in the year to December, Master Builders Australia chief economist Shane Garrett said there was still a “gross mismatch” between supply and demand, especially for rental accommodation, with the cost of building a new home still 40 per cent higher than it was five years ago.

Inside and Out Builders owner Paul Leadbeatter with his dog Milly on Wednesday.Credit: Wayne Taylor

Inside and Out Builders’ owner Paul Leadbeatter, who works primarily on renovations and extensions in Melbourne, said he had noticed even cashed-up retirees being more conservative with their builds.

“Even a single-storey extension on, say, little traditional town homes in Carlton, Fitzroy, Brunswick, West Melbourne, Windsor … can be $500,000-plus,” he said.“Business owners who come to me [are often] doing pretty well for themselves, but the kind of job they’re trying to do is still pinching their budget.”

Leadbeatter noticed more builders offering discounts and promotions and said many were larger companies that had minimum build targets they had to hit, given their numbers of staff.

“At the end of the day, builders do have high overheads, and if they’re not making their right margins on jobs, it’s a trickle-down effect to bankruptcy in the long run,” he said.

However, Leadbeatter warned the tactics didn’t always lead to great outcomes for builders, with some undercutting jobs and varying the price later, or finding ways to get money back.

Good time to be a vegetarian

In good news for food lovers, food and non-alcoholic drinks prices climbed 3 per cent in the 12 months to the December quarter – down from 3.3 per cent in the September quarter.

Inflation across most food categories cooled, with price tags on dairy products shrinking, although egg prices surged as supply continued to be hampered by an outbreak of bird flu last year. While fruit and vegetable prices were 6.3 per cent higher than a year ago, they fell 3.3 per cent in the December quarter as good growing conditions helped boost supply of tomatoes, cucumbers, beans, mangoes and strawberries.

Heat continues to come out of energy and petrol prices

Those visiting the bowser or paying energy bills recently may have breathed a sigh of relief. Petrol prices slid 8 per cent over the year and a continued fall in electricity prices has helped keep the lights on.

Weaker petrol prices reflected lower global oil prices over the year as demand for the commodity dropped across the world. The national average petrol price was $1.82 a litre on Sunday, January 26, down from about $1.97 a litre around the same time last year.

Meanwhile, federal and state government subsidies have helped take the heat out of energy bills. Electricity prices are down 10 per cent for the quarter and 25 per cent over the year as households in all states and territories cashed in on the second instalment of the federal government’s energy bill relief program.

Cost of having fun flies up

The holiday period might have helped households relax and unwind, but it also pushed up prices in recreation and culture, putting it among the categories with the most significant price pressure last quarter.

Recreation and culture prices bounced 3.3 per cent over the year as Australians caught the travel bug but decided to stay in the country. Domestic holiday travel and accommodation took off at 5.7 per cent for the quarter as demand during the school holidays spiked, driving up prices for airfares and accommodation.

While prices are continuing to climb, the latest inflation figures point to an easing in price pressures that could be enough to tip the Reserve Bank towards a rate cut at its February meeting.

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