New report shows online retailers played vital role in preventing Australia’s inflation crisis from deepening

A new report has revealed the factor helping Australia’s inflation crisis and the staggering amount households are saving as a result.

A new report has revealed increased competition from online retailers and lower priced products help Australia’s inflation crisis from worsening.

The report — titled Surf, Shop, Save: Online retail helps lower costs of living — prepared by Mandala, compared the prices of more than 60,000 products sold online with the Consumer Price Index to understand the effect online retail channels had on inflation.

The report commissioned by Amazon Australia found annual inflation could have been 0.7 percentage points higher at its peak in 2022 if it wasn’t for “cost efficiency” and the “competitive effects of online retail channels”.

RBA cash rate target since 2015, according to the report. Picture: Supplied

The report also revealed lower income households had disproportionately benefited from online retail channels.

The report found savings from reduced handling and improved distribution helped lower the cost of online products and reduced prices throughout the retail sector as a result of increased competition and consumer choice.

According to the report, the average Australian household saved up to $3500 as prices for online goods fell between 2019 and 2023.

The difference between the change in online prices and Consumer Price Index was 10.5 percentage points by December 2023, meaning Aussie households saved the equivalent of three weeks worth of free groceries every year from 2019.

Cost savings among households were largest in the “recreation” and “culture” categories, which include items such as stationary, toys and pet food, where households had saved almost $1000 in the past five years, according to the report.

A report prepared by Mandala has revealed Australian retail sales over time in relation to online and offline channels. Picture: Supplied

Report author Adam Triggs said online shopping had helped ease the burden of cost of living on Australians.

“This research indicates online retail may be the unrecognised hero of the inflation crisis,” Dr Triggs said.

“Australia faced a perfect storm with supply chain challenges, the war in Ukraine and disruptions to global trade.

“But inflation would have been worse without online sales, which helped drive down prices directly and create competition to ease pressure on offline sales.

“Retail is a mix of online and offline channels, and retailers are increasingly blending them to reach consumers. As part of that mix, online channels are having a powerful competitive impact, helping consumers more easily shop around for the best price.”

Mr Triggs said without online retail channels, the Reserve Bank would have increased interest rates by a further 0.5 percentage points and subsequently, today’s cash rate would be 4.85 per cent.

“These savings make a real difference to Australians trying to manage household budgets,” he said.

Originally published as New report shows online retailers played vital role in preventing Australia’s inflation crisis from deepening