Consumer prices jumped 1.8 per cent in the three months to September 30, with new housing and gas prices leading the way.
Key points:
- Annual inflation of 7.3 per cent is the highest recorded since 1990
- The ABS said new housing, gas and furniture prices were the biggest contributors to a 1.8 per cent jump in prices during the September quarter
- The RBA's preferred measures of inflation were up 6.1 and 5 per cent over the past year — well above the bank's 2-3 per cent target
Official figures show prices are up 7.3 per cent over the past year, the steepest annual rise since 1990.
The day after handing down his first budget, Treasurer Jim Chalmers used a National Press Club address to highlight the challenge price rises were posing to households and the economy.
"Whether it's food, whether it's electricity, whether it's rent, inflation is public enemy number one," he told reporters.
"Inflation is the dragon we need to slay."
New housing costs were again the main contributor over the past year, along with petrol and diesel.
The cost of building or buying a newly built home climbed a further 3.7 per cent over the past three months and was up 20.7 per cent over the past year.
Even though relatively few people buy or build a new home in any given year, it is such a big expense that it carries a very heavy weight in the Consumer Price Index (CPI) published by the Australian Bureau of Statistics (ABS).
"Labour shortages in the house construction industry, leading to rises in labour costs, contributed to the rise in new dwellings this quarter," Michelle Marquardt, program manager of prices at the ABS, observed.
"The continuation of material shortages added further price pressure."
However, the ABS noted that the quarterly increases in new housing costs were starting to decline, in an early sign price pressures might be easing as demand softened.
However, while the trend in building costs may be starting to head down, the trend in rents is accelerating upwards.
Rents across the capital cities rose 2.8 per cent over the past year, but nearly half of that growth occurred in the September quarter, as Sydney and Melbourne rents started to catch up with soaring costs in the other capital cities.
Energy prices driving inflation
The other biggest contributor to price rises over the past year was automotive fuel, which was up 18 per cent, however petrol and diesel prices fell 4.3 per cent in the last quarter, before the discount to the fuel excise ended late last month.
Over the past three months, surging gas prices have taken over as a major consumer headache, up 10.9 per cent.
"Annual gas price reviews across the states and territories saw higher wholesale gas prices passed on to consumers in the September quarter," Ms Marquardt noted.
Consumers in some states were insulated from an even bigger rise in electricity prices by government rebates, but they will feel the crunch when the effect of those handouts fades in the current quarter.
"Electricity rose 3.2 per cent this quarter, with rises across the country offset by the Western Australian government's $400 electricity credit, and smaller credits offered by the Queensland and Australian Capital Territory governments," Ms Marquardt said.
"Excluding the effect of these schemes, electricity would have risen 15.6 per cent in the quarter."
Other notable price increases for the quarter included furniture (+6.6 per cent) and food (+3.2 per cent), with both takeaway (+2.9 per cent) and fresh food prices climbing strongly.
Essentials prices jump
The ABS said the biggest price increases remained concentrated in goods, with a 9.6 per cent annual surge the biggest since 1983, while the cost of services rose a more modest 4.1 per cent.
Indeed's Asia-Pacific economist Callam Pickering said another problem for many households was the type of goods and services where prices were rising fastest.
"A big issue is that rising prices have been concentrated in non-discretionary items. Inflation on these goods and services are 8.5 per cent higher, compared to 5.5 per cent higher for discretionary items," he observed.
"Items such as food and fuel and housing are non-discretionary for a reason. They are essentials that we rely on every day.
"When prices of non-discretionary goods and services rise sharply it's basically the same as households taking a pay cut — their incomes just don't go as far as they used to.
"Lower-income households tend to spend a greater share of their income on non-discretionary items … The current inflationary environment will be incredibly challenging for these households, compared to higher-income households who are better placed to absorb the impact of higher prices."
Interest rate pressure
The Reserve Bank's preferred measures of inflation, which strip out the most-volatile price moves, remained lower than the headline figure, with the trimmed mean at 6.1 per cent for the year and the weighted median at 5 per cent.
However, both those numbers remain well above the RBA's 2-3 per cent inflation target, meaning further interest rate rises are likely.
Although, Sean Langcake from BIS Oxford Economics expects the increases to be small.
"This is a very strong inflation print. Nevertheless, it is broadly in line with the RBA's expectations, meaning it will have a relatively limited impact on their outlook," he argued.
"We continue to expect a further 50 basis points of tightening before the RBA pauses to gauge how the economy is tracking."
He also said the Albanese government's first budget had done its part not to prompt additional interest rate rises.
"Last night's budget was quite restrained on the expenditure side, and should not add to the inflationary pressures the economy is facing," Mr Langcake added.
"Indeed, increased childcare and pharmaceutical subsidies will provide some downside for measured inflation in 2023."