The annual inflation rate jumped to 6.1 per cent in the year to June, the highest level in more than two decades.
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It illustrates a fact that many Australians know far too well – that the cost of just about everything is rising.
Head of prices statistics at the ABS Michelle Marquardt said a 1.8 per cent rise in the June quarter was the second-highest quarterly increase since the introduction of GST, bested only in the report three months earlier.
“The most significant contributors to the rise in the June quarter CPI were new dwellings (+5.6 per cent) and automotive fuel (+4.2 per cent),” she said.
“Shortages of building supplies and labour, high freight costs and ongoing high levels of construction activity continued to contribute to price rises for newly built dwellings.
“Fewer grant payments made this quarter from the Federal Government’s HomeBuilder program and similar state-based housing construction programs also contributed to the rise.
“The CPI’s automotive fuel series reached a record level for the fourth consecutive quarter. Fuel prices rose strongly over May and June, following a fall in April due to the fuel excise cut.”
Australians were also paying more at the supermarket checkout, the figures reveal.
In the June quarter, a head of lettuce was reported as costing up to $10, a result of supply shortages due to flooding in New South Wales and Queensland.
The cost of vegetables rose 7.3 per cent, meals out and takeaway foods rose 1.4 per cent and fruit rose 3.7 per cent.
“Supply chain disruptions due to flooding events, labor shortages, and rising freight costs contributed to higher prices,” the ABS said.
Annual trimmed mean inflation, which excludes large price rises and falls, increased to 4.9 per cent – the highest since the ABS first published the series in 2003.
Treasurer Dr Jim Chalmers said the figures were “not news” to many Australians.
“It is not news to millions of Australians who feel its inflation challenge, every time they go to the supermarket and every time the bills arrive,” he said.
“This inflation outcome today mirrors the lived experience of Australians who are doing it tough right now.”
He said it was likely inflation would rise again in the next quarter.
“These are confronting numbers when it comes to the cost of living pressures that Australians in every corner of the country are feeling.
“Inflation is high and rising, it will get tougher before it gets easier. The reality is the quarterly outcome does not yet include the electricity price spike that came in July.”
Chalmers is preparing for an economic statement to parliament on Thursday, ahead of the October budget.
It will contain updates on inflation, wages, unemployment, economic growth and other key figures.
He said inflation would be revised up “substantially” with growth revised down, as well as point to a short-term lag in wages.
“The idea that we would be forecasting wages growth that keeps up with (rising inflation), I think, would not be credible in the near term,” he said.
Economists expect the surge will prompt the Reserve Bank of Australia (RBA) to hike the cash rate for a fourth consecutive month when the board meets next Tuesday.
The inflation rate, otherwise known as the consumer price index (CPI), is reported by the ABS every quarter.
It’s calculated based on the change in prices for thousands of household items and expenses over a three-month period.
In the video below: What is inflation and how do we get it back down?
The ABS collects the prices of about 100,000 different items, including groceries and petrol and averages out how much more they cost compared to the same time three months earlier.
For everyday Australians, it does little more than confirm what is already known – that the cost of living is rising.
But AMP chief economist Shane Oliver said the importance of inflation could also be seen in its consequences.
“If you tell people the cost of living’s gone up 6 per cent, they would say ‘tell me something new’,” he told 7NEWS.com.au ahead of the figures being unveiled.
“It’s more significant in terms of the flow on effects. It’s telling us what we already know – that the cost of living is going up at a faster rate than most people’s wages are going up.
“But I guess the biggest flow-on effect is the impact to the roughly one-third of Australians who have a mortgage.”
Watch the video below: Interest rates and inflation explained
The RBA board considers the inflation rate when it makes its monthly call on hiking the interest rate.
Following the war in Ukraine, and the subsequent pressure it put on household budgets, the RBA hiked the interest rate from a record-low 0.1
After three consecutive increases, the cash rate sits at 1.35 per cent.
Oliver says that the RBA’s response would likely be proportionate to the inflation rate.
“If it’s around 6.2 or 6.3 (per cent) … then I suspect the RBA will go ahead with a 0.5 per cent interest rate hike next week,” Oliver said ahead of the figures being released.
“Alternatively, if it’s substantially higher, say 6.5 or more, then the risk is that the RBA would up the pace of rate hikes and go 0.75 per cent.
“And then we’d hear more talk of significant interest rate moves ahead.”
RBA Governor Philip Lowe earlier forecast that inflation was anticipated to go as high as 7 per cent before the year was out.
“Inflation in Australia is also high, but not as high as it is in many other countries,” Lowe said earlier this month after hiking the interest rate by 50 basis points.
“Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role.
“Strong demand, a tight labor market and capacity constraints in some sectors are contributing to the upward pressure on prices. The floods are also affecting some prices.”
– With AAP