The latest data from the Australian Bureau of Statistics (ABS) reveals that in August 2023, the monthly Consumer Price Index (CPI) surged by 5.2% compared to the previous 12 months. This significant increase has caught the attention of economists and consumers alike.
The driving forces behind this noteworthy rise in August were primarily in the Housing sector, where prices escalated by 6.6%, as well as in Transport (+7.4%), Food and non-alcoholic beverages (+4.4%), and Insurance and financial services (+8.8%).
Michelle Marquardt, the head of prices statistics at ABS, noted that this surge marked a considerable uptick from the 4.9% recorded in July. Despite this increase, the annual inflation rate remained below the peak of 8.4% reached in December 2022. Marquardt highlighted the influence of volatile price fluctuations in items such as Automotive fuel, Fruit and vegetables, and Holiday travel on CPI inflation. She suggested that excluding these items from the headline CPI calculation revealed a slightly lower annual increase of 5.5% in August compared to the 5.8% recorded in July.
Within the Housing sector, the annual increase of 6.6% for August was lower than the 7.3% registered in July. New dwelling prices experienced a 4.8% annual rise, the lowest since August 2021, primarily due to easing price pressures on building materials. Meanwhile, rent prices increased by 7.8% over the 12 months to August, up from 7.6% in July, reflecting a persistently tight rental market.
Electricity prices surged by 12.7%, while gas prices increased by 12.9% in the 12 months leading up to August, largely attributed to wholesale price hikes. However, rebates from the Energy Bill Relief Fund, introduced in most cities since July, helped mitigate the impact of electricity price increases for eligible households.
Automotive fuel prices soared by 13.9% compared to the same period last year, with a 9.1% monthly increase recorded in August. Marquardt pointed out that these fluctuations were partly driven by price changes from 12 months prior when Automotive fuel prices had fallen by 11.5% in August 2022. The combination of current price rises and base effects resulted in an annual increase of 13.9% for Automotive fuel in August, a stark contrast to the 7.6% decline in July.
In the Food and non-alcoholic beverages category, prices increased by 4.4% over the 12 months leading to August, marking a decline from the 5.6% annual increase observed in July. Notably, this represented the lowest annual increase since February 2022. Marquardt pointed out that while overall food inflation was on a downward trajectory, variations persisted across food categories. Prices for Bread and cereal products and Dairy products rose by over 10% in the past year, whereas Fruit and vegetable prices were 8.3% lower compared to the previous year, thanks to improved growing conditions.
For small and medium-sized enterprises (SMEs), these inflation figures serve as a crucial barometer of economic conditions. CreditorWatch’s Chief Economist, Anneke Thompson, emphasized that the all-inclusive monthly CPI had risen by 5.2% over the year to August, up from 4.9% the previous month. While this might not be welcome news for borrowers, Thompson noted that this figure was significantly influenced by the higher cost of fuel in August.
When excluding volatile items such as fuel, holiday travel, and fruit and vegetable items, the monthly CPI increased by 5.5%, which was down from the 5.8% reported the previous month. These statistics provide SMEs with valuable insights into cost pressures and inflation trends, allowing them to make informed financial decisions in an evolving economic landscape.
“Residential rents, fuel and insurance pricing continue to gain momentum. For the business community, rising insurance will have a big impact, and add to already significant cost pressures many businesses are facing. The construction sector, in particular, is very reliant on insurance, and while price growth momentum in building materials is slowing, rising insurance premiums will be the next headache the industry will face.
“This is on top of rising external administrations. CreditorWatch’s Business Risk results for August show that external administrations for the construction industry are now above pre-COVID levels.”