Inflation set to accelerate, economist warns

The Consumer Price Index (CPI) rose 0.6 per cent in the March quarter, with higher fuel prices, compared to the low prices in 2020, accounting for much of the rise.

The most significant rises were automotive fuel (+8.7 per cent), medical and hospital services (+1.5 per cent) and pharmaceutical products (+5.3 per cent) due to the resetting of the Medicare and Pharmaceutical Benefits Scheme (PBS) safety nets.

This had the biggest impact on constrained couples (+0.8 per cent), who spend a bigger proportion of their income on transport and medical care, mainly through private health insurance. Constrained singles and well-off couples and singles (+0.6 per cent) were also affected. Cash-strapped couples (+0.5 per cent) and singles (+0.4 per cent) were least affected as they tend to travel less and cannot afford private medical care.

A rise in prices for accessories (+7.3 per cent) reflected high consumer confidence and demand for discretionary items such as jewellery, allowing jewellers to pass through elevated input costs.

The CPI rose in all eight capital cities, ranging from 0.3 per cent in Melbourne to 1.4 per cent in Perth and 2.6 per cent in Darwin.

BIS Oxford Economics chief economist Dr Sarah Hunter said she expected inflation to accelerate sharply in the June quarter – above 3 per cent – for reasons including childcare costs, a further rise in average fuel prices, lifts in the cost of some insurance products and upward pressure on new dwelling costs as a result of commodity and labour shortages in the sector.

“Notwithstanding these one-off factors, core inflation is likely to remain weak for some time,” she said.

Did the higher fuel and medical costs have a big impact on you in the first quarter? Have you had to tighten the belt?

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