The narrow economic path that the Reserve Bank and federal government have been walking for the past two years has just got even more slender.
In a setback to the bank, and the cause of a major political headache for Treasurer Jim Chalmers, the March quarter consumer price index report showed inflation is buried deep into parts of the economy with few signs it will be easily excised.
Jim Chalmers faces an even tougher May 14 budget after new inflation figures showed prices continuing to climb.Credit: Darren England
According to the Bureau of Statistics, consumer prices increased by a full percentage point through the first three months of the year. While annual inflation hit a 2½-year low of 3.6 per cent, it was the quarterly lift that will have grabbed the RBA.
Education inflation jumped to a 12-year high of 5.9 per cent, in part due to private schools raising their fees to start the new year.
In Sydney, education accounted for more than a quarter of the increase in inflation through the quarter. In Perth, which has a very deep private school sector, education caused more than a third of the city’s inflation.
But before you start taking your wrath out on the local private primary school, inflation was also driven by rents, which are now climbing at their fastest rate in 15 years. Sydney’s rent inflation has climbed by 8.9 per cent over the past 12 months. Two years ago, it had fallen by 1.2 per cent.
Insurance inflation is another huge problem, with prices up by a 23-year-high of 16.4 per cent.
As the bureau noted, this is being driven by higher reinsurance costs (which are set outside of Australia), the impact of natural disasters and overall claim costs, which are then feeding into premiums for houses, home contents and cars.
Prices are falling in some areas. Beef prices in Melbourne, for instance, fell by 5.2 per cent over the past year, while lamb prices tumbled by 17.6 per cent (the biggest annual drop in lamb chops since 1975).
