Australia records largest jump in inflation since introduction of GST

Australia has recorded the largest quarterly and annual increase in inflation since the introduction of the Goods and Services Tax (GST) in 2000.

The shock inflation figure largely beat market expectations, which was expecting an increase to match that of the Global Financial Crisis, when the annual CPI hit 5 per cent in September 2008.

A larger-than-expected rise in inflation may also force the hand of Reserve Bank of Australia (RBA) to hike interest rates at its next meeting on May 3rd.

Today’s 5.1 per cent increase is the largest annual change in CPI since June 2001, when the introduction of the GST rose headline inflation by 6.1 per cent.

Head of Price Statistics at the ABS Michelle Marquardt said the most significant contributions to the March CPI were new dwellings, the cost of fuel and the cost of education.

“Continued shortages of building supplies and labour, heightened freight costs and ongoing strong demand contributed to price rises for newly built dwellings,” said Ms Marquardt.

“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 third consecutive quarter, with fuel price rises seen across all three months of the March quarter.”

Headline inflation has recorded the biggest annual jump since the introduction of the GST. (Graphic: Tara Blancato)

Today’s figures come at a time when politicians contesting the 2022 Federal Election are looking for ways to deal with the soaring cost of living.

The Morrison Government has halved the fuel excise for six months to help address the cost of fuel, which grew 11 per cent in the March quarter.

It’s likely that the halving of the fuel excise will play in the next quarter’s CPI figures.

Ms Marquardt said the severe spike in petrol inflation was record-breaking.

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“Strong demand combined with material and labour supply disruptions throughout the year resulted in the highest annual inflation for new dwellings since the introduction of the GST,” Ms Marquardt said. 

“Annual price inflation for automotive fuel was the highest since the 1990 Iraqi invasion of Kuwait.” 

The CPI is largely considered to be Australia’s standard way of measuring inflation.

It works by assessing the changing prices of a standard basket of goods including petrol, food, clothing, education, insurance and housing among others.

The RBA is under increasing pressure to lift interest rates from the historic low level of 0.1 per cent. (AAP)

Shock inflation figures push forward threat of interest rate hike

This morning’s shock inflation increase – the largest seen in more than two decades – may increase the likelihood of the Reserve Bank of Australia (RBA) increasing interest rates next month.

The RBA is due to hand down its next monetary policy decision on May 3.

Currently, interest rates in Australia are at the historic low level of 0.1 per cent.

The RBA has long maintained that it would require inflation to lift sustainably before lifting rates.

Today’s data largely fulfils that requirement – meaning a hike in interest rates could come nearly 31 days earlier than expected.

Reference-www.9news.com.au

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