Inflation’s four-year surge delivers big rises for many goods, services

Bread up 25 per cent, fuel up 38 per cent: no wonder households are hurting, and new CPI figures show inflation’s impact on necessities. See the 20 biggest rises.

Surging household costs since the pandemic started have been put into sharp focus by the latest inflation figures from the Australian Bureau of Statistics.

While the official Consumer Price Index increase of 3.6 per cent for the year to March 31 continued the trend towards lower inflation, an analysis of the new data shows dozens of key expenses have climbed much higher than overall CPI of 17 per cent since March 2020.

Many costs – mainly necessities such as food, fuel, houses and insurance - have jumped more than 25 per cent in the four past years.

This includes the early period of Covid-19 when Australia recorded negative CPI.

AMP chief economist Shane Oliver said inflation had been through “a bit of an odd period”.

“We went through a rollercoaster ride when prices first fell in the pandemic then have taken off at various points after the pandemic,” he said.

Costs such as home rents are hurting tenants today but only climbed 12 per cent overall.

“There were various moratoriums on rentals during the pandemic but they have taken off more recently,” Dr Oliver said. Rents rose 7.8 per cent annually in the year to March 31, their biggest rise since 2009.

BetaShares chief economist David Bassanese said the main pressures keeping inflation higher today were housing and services.

“Average annual inflation in the three years prior to Covid was 1.8 per cent - today’ it is 3.6 per cent,” he said.

Mr Bassanese said rises in services inflation reflected businesses passing on higher costs.

“If insurance and rents are up and you are a service provider you have to increase your prices,” he said.

Services costs that have climbed the most in the four years included insurance (up 35 per cent), Domestic holidays (up 29 per cent), postal services (up 28 per cent) and veterinary services (up 26 per cent).

Medical and hospital services were just outside the top 20 biggest price increases, rising 21 per cent in four years. The largest rises overall were oil and fats (up 40 per cent), tobacco (up 39 per cent) and fuel (up 38 per cent).

“I still think we are on track for inflation to come down,” Mr Bassanese said.

“Prices will stay high but the rate of increase will moderate,” he said.

Mr Bassanese said the latest higher-than-expected annual CPI figures “were a miss, but only 0.1 per cent of what was expected”.

“It’s still coming down, just not as quickly and the RBA and economists like myself were hoping,” he said.

AMP chief economist Shane Oliver says the inflation trend is down. Picture: Supplied

Dr Oliver said many people were upset that the biggest price rises were often in necessities, “the things they have to spend money on”, while prices of clothing and several other discretionary items had barely moved.

He expects overall inflation to keep dropping.

“There was alarm at Wednesday’s numbers, but in the last couple of years we have had a quarter on the high side, then a quarter on the low side.

“If you cut through it, the trend is still down, from 7.8 per cent (in 2022) to 3.6 per cent.”

KPMG chief economist Brendan Rynne said the biggest drivers of the latest inflation figures were education and health – two categories that always surged in the March quarter.

“Following the March quarter these two categories then don’t tend to add any more to inflation for the next three quarters – so in effect they’re now out of the inflation equation until March 2025,” Dr Rynne said.