Election 2022: We’re hanging tough as inflation pandemic grips

Treasurer Josh Frydenberg works up a sweat on a visit to RB Robson Stadium at Wallan, Victoria. Picture: AAP

Australia is not the only country suffering an inflationary outbreak that politicians and central bankers are racing to contain.

Across the developed world massive government and central bank stimulus has sent demand for goods soaring at a time when Covid-19 has triggered major disruptions to global supply chains.

More recently, Russia’s invasion of Ukraine has triggered increases in commodity prices and fuelled pain at the petrol pump for motorists around the world.

Josh Frydenberg has been quick to point out these global forces are behind the 5.1 per cent increase in consumer prices over the year to March.

“Australia is no different to other countries seeing higher inflation,” the Treasurer declared on Thursday.

The most extreme example is in the US, where an overheated economy has combined with severe labour shortages to drive inflation to a 40-year high of 8.5 per cent over the year to March – well ahead of the 5.1 per cent increase in consumer prices here.

Food prices in America were up 8.8 per cent in the year, and energy 32 per cent.

Closer to home, inflation in New Zealand has jumped to a 30-year high of 6.9 per cent, driven by rising home construction and household rental and utilities prices.

In response, the New Zealand central bank is already months into a rate-hike cycle that began in October and has lifted the country’s cash rate from 0.25 per cent to 1.5 per cent.

In Europe and in the UK the spike in energy costs associated with the war in Ukraine has triggered an even more dramatic spike in cost-of-living pressures.

Inflation in the eurozone climbed from 5.9 per cent over the year to February to 7.4 per cent last month.

That included a 44 per cent surge in electricity bills, and an 8 per cent increase in fresh food prices that helped make cost of living the number one economic issue during the recent French election.

Higher electricity costs and petrol prices were also largely responsible for the 7 per cent jump in the United Kingdom’s consumer price index – the highest since 1992.

The real wages of British workers, like here, are also going backwards, falling 1 per cent over the year to January.

Nor is there much relief ahead.

The British Office of Budget Responsibility has predicted that the war in Ukraine could push inflation to a 40-year high of 8.7 per cent by the end of this year.