The Consumer Price Index (CPI) rose 0.8% in the June 2023 quarter and 6.0% annually, according to the latest data from the Australian Bureau of Statistics (ABS).
ABS Head of Prices Statistics Michelle Marquardt says, “CPI inflation slowed in the June quarter, with the quarterly rise being the lowest since September 2021. While prices continued to rise for most goods and services, there were some offsetting price falls this quarter including for domestic holiday travel and accommodation and automotive fuel.”
Quarterly CPI inflation
The most significant contributors to the rise in the June quarter were rents (+2.5%), international holiday travel and accommodation (+6.2%), other financial services (+2.5%) and new dwellings purchased by owner occupiers (one%).
“Rents recorded the strongest quarterly rise since 1988, reflecting low vacancy rates amid a tight rental market. Rental price growth for flats continued to outpace the growth for houses.
“Higher demand for international travel, particularly to Europe with the start of the European summer peak season, led to price increases. These were partially offset by price falls for travel to South-east Asia and New Zealand as prices dipped following increases during the Christmas and school holiday periods in December and January,” Ms Marquardt said.
Fees and charges associated with real estate transfers were the primary contributors to the increase in other financial services.
The rate of growth in new dwelling prices continues to slow down this quarter. This reflects lower new demand as well as material costs easing.
Food prices (+1.6%) also rose this quarter following increases of 1.6% and 0.9% in the March 2023 and December 2022 quarters. This rise was driven by meals out and takeaway foods (+1.7%), fruit and vegetables (+2.4%) and bread and cereal products (+2.9%).
“A shortage of potatoes due to wet weather in key growing regions late last year has continued to place pressure on prices for potato products, including takeaway hot chips, potato crisps and frozen potato products. Vegetable prices rose due to some salad vegetables, like tomatoes and lettuces, coming out of season,” Ms Marquardt said.
Reducing the June quarter rise were price falls for domestic holiday travel and accommodation (-7.2%), electricity (-1.8%), clothing accessories (-2.2%) and automotive fuel (-0.7%).
Annual inflation measures
Annually, the CPI rose 6.0%, with new dwellings (+7.8%), rents (+6.7%) and domestic holiday travel and accommodation (+13.9%) the most significant contributors.
“June quarter’s annual increase of 6.0% is lower than the 7.0% annual rise in the March 2023 quarter. This marks the second consecutive quarter of lower annual inflation, also known as ‘disinflation’, from the peak of 7.8% in the December 2022 quarter,” Ms Marquardt said.
Underlying inflation measures reduce the impact of irregular or temporary price changes in the CPI. Annual trimmed mean inflation was 5.9%, down from 6.6% in the March quarter.
Monthly CPI indicator
The ABS also released the monthly CPI indicator for June, which rose 5.4% in the 12 months to June. The monthly CPI indicator has been improved through the introduction of a new monthly Gas series. As a result, there have been small revisions to the monthly CPI indicator. The revised annual rise for May was 5.5% and April was 6.7%.
Price increases for new dwellings (+6.6%) were the most significant contributor to the annual rise, down from 8.3% in May and 9.2% in April. Rents increased to 7.3% in the 12 months to June, up from 6.3% in May.
“The annual increase for the monthly indicator eased in June as automotive fuel prices fell 10.6%, following a fall of 8.0% in May and a rise of 9.5% in April,” Ms Marquardt said.
CreditorWatch Chief Economist Anneke Thompson says today’s inflation rate came in at below market expectations, with particular progress made in the slowing rate of goods inflation. “Goods inflation dropped from 7.6% over the year to March 2023 to 5.8% over the year to June. Goods inflation is far more responsive to monetary policy changes than services inflation, and this shows that consumers have well and truly responded to the RBA’s tightening measures,” she said.
“Services inflation is still increasing, and at 6.3% over the year to June is the highest rate since the introduction of the GST. Inflation in the services sector was largely driven by steep increases in the cost of insurance and rent. Further increases to the cash rate are going to have limited impact on price growth in these areas, and it is likely that the RBA board will take this into consideration at their meeting in August.
“Trimmed mean inflation came in at 5.9%, a significant decrease from 6.6% over the year to March. This result has reduced the chance of a further cash rate rise at the August meeting. It now seems that Labour Force data will become more crucial to the RBAs decision making. The board will be hoping to see some softening in unemployment rate, to reduce the chance of further pressure on wages,” Ms Thompson said.