Election 2022: Cash fillip lobs ahead of horror CPI hike

The Morrison government’s $250 cost of living payment will start hitting bank accounts of more than six million Australians from Wednesday.

Consumer prices are rising meaningfully for the first time in 12 years. Picture: Nigel Hallett

The Morrison government’s $250 cost of living payment will start hitting bank accounts of more than six million Australians from Wednesday, ahead of new inflation data that will reveal a sharp acceleration in the price of food, petrol and rents over the first three months of the year.

Eligible pensioners, welfare recipients, veterans and concession card holders (including self-funded retirees) will have received $1.5bn in the one-off cash handout by the end of this week, according to Treasury data.

The payments are part of an $8.5bn package announced in the March budget, which included halving the petrol excise tax for six months and boosting the temporary low and middle-income tax offset for 2021-22 by $420, bringing the total maximum deduction to $1500 for eligible taxpayers.

As the government tries to pre-empt a renewed attack from Labor over climbing cost of living pressures and falling real wages, economists forecast the Australian Bureau of Statistics’ consumer price index climbed by 4.6 per cent over the year to March, a major step up from 3.5 per cent through 2021.

That would be the fastest increase since September 2008, when it reached 5 per cent leading into the global financial crisis.

Josh Frydenberg said “the ­Coalition’s economic plan is helping families with cost of living pressures when they need it most”.

“Global factors such as high oil prices due to Russia’s invasion of Ukraine and supply chain disruptions due to Covid are putting pressure on household budgets here at home,” the Treasurer said.

“That is why in the budget we committed to a temporary, targeted and responsible cost of living package.”

Wednesday’s inflation data will lay the foundation for Australia’s first rate hike in more than a decade at the Reserve Bank’s June board meeting, with more economists in recent weeks pencilling in a 0.4-percentage-point lift from 0.1 per cent to 0.5 per cent, rather than the more likely 0.15-percentage-point increase.

Several experts also highlight the potential for a hike as early as next Tuesday, with investors pricing in a nearly 60 per cent chance of a an increase to 0.25 per cent at the May board meeting – a probability that would rise should consumer prices prove to have climbed faster than expected at the start of the year.

Monetary policymakers are scrambling to get ahead of a surge in rapidly climbing consumer ­prices, as the trillions in fiscal spending over the past two years turbocharged demand just as the pandemic strangled the global movement of goods.

A spike in energy and food costs associated with the Russian invasion of Ukraine has further inflated prices around the world and sharpened worries that inflation could get out of hand.

A significant inflationary pulse in Australia is down to climbing petrol and imported good prices, but food inflation is also on the rise.

The quarterly inflation rate, on consensus forecasts, is predicted to hit 1.7 per cent – including a 10 per cent lift in fuel costs – and a much stronger than anticipated lift in the CPI would put the RBA in a difficult spot ahead of its board meeting next week.

Australian consumer price growth pales next to annual inflation of 8.5 per cent in the US, and about 7 per cent in Germany, Canada and New Zealand.