Transport, housing, furnishings drive inflation

Inflation in the September quarter was largely driven by international factors. With the world reopening after the pandemic, bottlenecks in production and transport have emerged as businesses try to ramp up production following the lockdowns. Demand for oil has also pushed up the price of automotive fuels.

The main drivers of inflation were transport, housing and household furnishings and equipment.

Transport was up because oil prices continue to rise, pushing petrol prices higher (+7.1 per cent). Automotive fuels have reached record levels, surpassing the previous high set in March 2014. Motor vehicle prices continued to rise (+1.4 per cent) because of ongoing strength in demand and global supply constraints.

Housing increased (+1.7 per cent) because of rising building costs. New dwellings purchased by owner-occupiers (i.e. the price of building a new house excluding the price of the land) rose 3.3 per cent. This has been caused by strong demand in construction, which has enabled builders to pass through increases in their costs.

Government rates also rose (+3.3 per cent) after the end of the rates freeze that many councils had in place.

Household furnishings and equipment do not usually have a big impact on inflation but for the second quarter in a row registered a big increase (+1.6 per cent). This was driven by furniture (+2.1 per cent) due to supply shortages and transport constraints.

Cash-strapped singles experienced the biggest increase in prices (+1.2 per cent) because of the increase in the cost of housing. All other cohorts saw an increase of 1 per cent, largely driven by a combination of transport costs and housing.

Matt Grudnoff is a senior economist at The Australia Institute.

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Written by Matt Grudnoff



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