In the latest release by the Australian Bureau of Statistics (ABS), the Consumer Price Index (CPI) indicator for July 2023 exhibited a 4.9% increase over the past 12 months.
This growth marks a slight slowdown from June’s 5.4% figure. Michelle Marquardt, Head of Prices Statistics at ABS, pointed out that this month’s rise continues the trend of decreasing annual price hikes since the peak of 8.4% in December 2022.
Housing and Food emerged as the primary contributors to the annual surge in July, with increases of 7.3% and 5.6% respectively. On the flip side, the rise was tempered by notable price drops in Automotive fuel (-7.6%) and Fruit and vegetables (-5.4%).
Marquardt highlighted that CPI inflation can be swayed by volatile items such as automotive fuel, fruits, vegetables, and holiday travel. For a more comprehensive view of underlying inflation, she recommended excluding these erratic components from the headline CPI calculation. This adjustment yields a more moderate decline in annual inflation, measuring 5.8% in July as opposed to June’s 6.1%.
The housing sector’s yearly uptick of 7.3% showed a marginal decrease from June’s 7.4% rise. New dwelling prices increased by 5.9% – the smallest annual growth since October 2021 – as escalations in building material costs continued to ease. In contrast, rent prices exhibited a 7.6% increase in July, up from June’s 7.3%, signaling the persistence of a tight rental market.
The energy landscape saw significant movement as electricity prices surged by 15.7% over the 12 months leading to July, with a monthly rise of 6.0% in July alone. These increments were a result of comprehensive price reviews across all major cities. Notably, rebates introduced in July alleviated the impact of electricity price hikes for eligible households.
Marquardt detailed that the Energy Bill Relief Fund extended rebates ranging from $43.75 to $250 in July. Excluding these rebates from the July 2023 figures, electricity prices would have recorded a more substantial monthly increase of 19.2%.
In the domain of Food and non-alcoholic beverages, the 12-month increase of 5.6% leading up to July marked a decrease from June’s 7.0%, representing the lowest annual growth since May 2022. Marquardt attributed this trend to a continued relaxation of food inflation across various categories. She also noted a 5.4% decrease in fruit and vegetable prices compared to a year ago due to favourable growing conditions leading to increased supply.
CreditorWatch’s Chief Economist, Anneke Thompson says: “The monthly CPI data continues to show an easing of price rises in most categories in the CPI basket. The exceptions, however, are rents, which rose by 7.6% over the year to July, up from 7.3% in June. Electricity prices also rose by a substantial 15.7% over the year to July. This substantial increase even takes into account the Energy Bill Relief Fund. If this had not been included, the monthly increase in electricity bills would have been 19.2%, instead of 6.0%.
“Food and beverage prices continue to ease, thanks to better growing conditions. There was even a fall of 5.4% in the overall price of fresh food and vegetables. However, meals out and takeaway food inflation remains steady, and largely reflects the needs of business owners to pass on higher utility and rent costs to their patrons. For now, Australian consumers, particularly those aged 65 and over, are continuing to eat out at restaurants and cafes, with spending in this category increasing by 1.3%, versus 0.5% overall.
“However, with diminishing savings rates, particularly among younger people, and interest rates that will remain high for some time, we expect margins in the food and beverage sector to continue to be challenged at the same time as customer demand flattens, or even falls.”
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