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Small inflation increase over 2018's first quarter

Small inflation increase over 2018's first quarter

Back to school costs and rising wholesale gas prices are among the factors that have impacted Australian household budgets over the first quarter of 2018, though inflation rose relatively little, according to the latest data from the Australian Bureau of Statistics (ABS).

The nation’s Consumer Price Index (CPI) rose 0.4% in the March 2018 quarter; a slightly lower increase than the 0.6% rise recorded in the preceding December 2017 quarter. On a year on year basis, CPI rose 1.9%, remaining steady with the year on year increase recorded in the December 2017 quarter.

What is CPI, and how is it used?

According to the ABS, a Consumer Price Index, or CPI, is a measure of the average change over time in the prices paid by households for a fixed basket of goods and services.

CPI is primarily used as a macro-economic indicator by the government and economists to monitor and evaluate levels of inflation in the Australian economy, and for adjusting dollar values of types of fixed payments, such as pensions and contracts.

For example, CPI is understood to be a consideration when the Reverse Bank of Australia (RBA) meets to decide whether to raise or lower the nation’s cash rate

Quarterly price rises
  • Food and non-alcoholic beverages: +0.5%
  • Alcohol and tobacco: +0.7%
  • Housing: +0.7%
  • Health: +2.2%
  • Transport: +1.1%
  • Education: +2.6%
  • Insurance and financial services: +0.3%
  • International non-tradeables: +0.8%
Quarterly price falls
  • Clothing and footwear: -2.0%
  • Furnishings, household equipment and services: -0.4%
  • Communication: -0.4%
  • Recreation and culture: -0.7%
  • International tradeables: -0.4%

Rises and falls

Factors contributing to increases this quarter included:

  • Secondary education (+3.3%)
  • Gas and other household fuels (+6.0%)
  • Pharmaceutical products (+5.6%)
  • Vegetables (+3.7%)
  • Medical and hospital services (+1.5%).

Meanwhile, there were falls in:

  • International holiday travel and accommodation (-2.4%)
  • Audio, visual and computing media and services (-6.1%)
  • Furniture (-2.8%)

Some of the rising costs this quarter can be attributed to:

  • The start of the new school year (Education)
  • Rising wholesale prices for gas and electricity (Household fuels)
  • The cyclical reduction in the proportion of consumers who qualify for subsidies under the Pharmaceutical Benefits Scheme (PBS) and Medicare Benefits Scheme (MBS) (Pharmaceutical products and hospital services)
  • Adverse weather conditions in major growing areas (Vegetables)

Some of the falling costs this quarter can be attributed to:

  • Winter off-peak seasons in Europe and America (International holiday travel and accommodation)
  • Ongoing competition and continued discounting activity in the retail industry (Furniture)

CPI for the capitals

On a state by state basis, seven out of Australia’s eight capital cities experienced increases in CPI over the March 2018 quarter, with the exception of Darwin, which stayed flat.

ABS chief economist, Bruce Hockman, said that while several of the east coast cities experienced annual inflation higher than 2%, softer economic conditions in Darwin and Perth saw subdued annual inflation of 1.1% and 0.9% respectively.

Capital cityCPI Mar Qtr 2018Change from last quarterChange from last year
Weighted average of all capitals112.60.41.9%

Source: ABS

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.



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