Inflation figures bring more pain to household budgets

The price of almost everything went up towards the end of 2022 with latest inflation figures revealing the Consumer Price Index rose 7.8% in the 12 months to December, the highest annual increase since 1990.

This is expected to put pressure on the Reserve Bank of Australia to further push up the cash rate – leading to more increases in home loan interest rates – as the central bank tries to bring down inflation. So what was hit by inflation?

The Australian Bureau of Statistics (ABS) compiles the Consumer Price Index (CPI) by monitoring changes in the prices of a huge range of everyday goods and services. The figures are compiled every quarter, though the ABS has also started another measure of inflation on a monthly basis.

The latest quarterly figures show the CPI rose 1.9% in the December quarter of 2022.

The largest quarterly movement was a rise of 5.4% for prices classified as recreation and culture, which the ABS breaks down further to a rise of 13.3% for domestic and 7.6% for international holiday travel and accommodation.

“Strong demand, particularly over the Christmas holiday period, contributed to price rises for domestic holiday travel and international airfares,” said Michelle Marquardt, ABS head of prices statistics.

A rise of 7.8% on games, toys and hobbies would have put pressure on anyone looking for such gifts at Christmas. Electricity prices were also up by 8.6% in the final quarter of 2022.

Inflation: quarterly vs annual changes to December 2022

The ABS found some quarterly prices were down, such as a 10.2% drop in vegetables and a 2.9% drop in fruit, but both still above prices 12 months ago, and prices in general for food and non-alcoholic beverages up 9.2% across the year.

As for fuel prices, they rose 2.2% in the December quarter, partly blamed on the federal government’s end of the temporary cut in fuel-excise. Prices were still 13.2% higher compared to 12 months ago.

The quarterly 0.5% fall in communication is attributed to a drop in the cost of telecommunication equipment and services, but again prices are up 1.3% across the year.

Canstar’s Editor-at-Large and money expert, Effie Zahos, said talk of inflationary pressures easing hasn’t yet fed into the numbers.

“Economists were tipping annual inflation to reach 7.6% but it came in higher, although lower than what the Reserve Bank had expected at 8.0%,” she said.

“Consumers will continue to feel price pressure on key household bills for at least the first half of this year.”

Inflation across the nation: CPI in the capitals

The ABS looks at the change in prices for a number of goods and services across the nation so it can break down the inflation figures for each state and territory capital.

Quarterly inflation across the capitals

Perth recorded the largest quarterly rise out of all the capital cities, up 3.6% overall. The ABS says a big factor was electricity, up 527.2% as most households returned to normal electricity bill levels with the lessened impact of the Western Australian government’s $400 Household Electricity Credit.

In Brisbane, electricity was down 14.0% due to the Queensland government's $175 Cost of Living Rebate introduced in the last quarter. Hobart also saw a drop in electricity, down -7.3%, due to the introduction of the Tasmanian Government’s $119 Winter Bill Buster electricity discount for concession households.

Child care was up 8% in Sydney due to reduced uptake of the New South Wales Government's before- and after-school care vouchers which led to higher out-of-pocket costs for families.

Darwin recorded the smallest rise of all capital cities, at just 0.9%.

How to beat inflation?

There are a number of things you can do to try to avoid some of the inflationary price hikes.

The key thing is to know which goods and services are being impacted more by inflation, and which are remaining steady, then you can have a better idea on where you need to spend, and when you need to save.

For example, when it comes to fuel, we’ve all seen the price go up for a regular fill-up at the bowser. But there are some tips and tricks you can use to find what may be the cheapest fuel in your neighbourhood or location when travelling.

When shopping for groceries there are plenty of options to help you find those bargains. One tip is not to be too brand-loyal, shop around and use some of the handy websites and apps that can help you seek the cheapest price on your regular shop.

With supply chain issues and transit costs blamed for some of the price increases, it could also be worth considering local suppliers who are less likely to need to pass on these costs to customers.

If you can’t avoid some of the areas where inflation is surging, say on buying a new home, then you should at least make sure you have a competitive home loan.

Further home loan rate increases are expected in 2023 – partly due to rising inflation – so now could be a good time to shop around for a good deal. You can use Canstar’s comparison tables to help find a home loan that best suits your budget.

Of course, with living costs going up, it could also be a good time to look at what you’re being paid and whether it’s time to ask for a pay rise to at least match the rate of inflation.

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