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Inflation has fallen but still remains well above the Reserve Bank target – meaning more interest rate rises are likely.
The consumer price index rose by six per cent in the year to June, down from seven per cent in the year to March, the Australian Bureau of Statistics revealed on Wednesday.
The quarterly measure, which is more comprehensive, showed price pressures remain elevated, with inflation still well above the Reserve Bank’s two to three per cent target.
The supermarket checkout is still a stressful place to be with dairy product prices soaring by 15.2 per cent annually, as bread and cereal costs rose by 11.6 per cent.
Inflation has fallen but still remains well above the Reserve Bank target – meaning more interest rate rises are likely (pictured is a Woolworths shopper in Sydney’s east)
Housing costs, including rent, are continuing to surge, growing by 8.1 per cent during the last financial year.
A separate, official monthly measure showed overall inflation in June growing at an annual pace of 5.4 per cent, down from a downwardly revised 5.5 per cent in May.
The high measures of inflation – for the June quarter and June – have stirred fears the Reserve Bank of Australia will increase interest rates again in August by another 0.25 percentage points, taking the cash rate to an 11-year high of 4.35 per cent.
The 30-day interbank future market is pricing in another rate rise on Tuesday next week, which would be the 13th since May 2022, adding to the most aggressive pace of monetary policy tightening since 1989.
But in a rare bit of good news, petrol prices have fallen by 10.6 per cent during the past year, with 91 octane unleaded fuel selling for 176.5 cents a litre.
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The monthly reading also showed a 12.9 per cent annual increase in holiday and accommodation costs.
With volatile items, like petrol and holiday accommodation excluded, the underlying measure of inflation is still high at 6.1 per cent.
That means outgoing Reserve Bank Governor Philip Lowe could potentially raise rates in August and September before handing over to his deputy Michele Bullock on September 18, following the end of his seven-year term.
The official inflation data was released a day after supermarket giant Coles said customers were cutting back on steak and switching to minced meat to cope with the cost of living crisis.
Vittoria Bon, the group’s manager of government and business relations, told a parliamentary hearing certain meats had become a luxury item as customers focused on weekly specials.
‘So customers are more conscious of those and with cost of living, they are trading down into more value products,’ she told the House of Representatives economics committee hearing on Tuesday.
‘So, for example, instead of perhaps buying steak, people will buy mince, which we’ve got dropped and locked at $12 for a kilo, so there is a change in what people are buying as well as when they shop.’
This is less than half the price of T-bone steak, with 1kg selling for $30.
Woolworths chief commercial officer Paul Harker said milk prices were more likely to stay higher.
The high measures of inflation have stirred fears the Reserve Bank of Australia will increase interest rates again in August by another 0.25 percentage points, taking the cash rate to 4.35 per cent (pictured is incoming governor Michele Bullock, left, with outgoing RBA chief Philip Lowe)
‘The biggest area we’ve seen with cost increases has been across the dairy category and that’s been a function of the significant lift in farmgate milk prices across the board,’ he said.
Elevated crude oil and grain prices would also feed into meat prices, but these wholesale pressures were moderating.
‘We are starting to see meat prices, in some instances, come down if you think of beef and lamb, less so in pork,’ Mr Harker said.
The monthly inflation measure showed meat and seafood prices rising by 2.7 per cent in the year to June, a level well below the inflation rate.
Mr Harker said Woolworths operated on a three-month cycle when it came to buying beef cattle livestock to be slaughtered, processed and put on supermarket shelves.
‘We know that meat is a very important staple for our customers,’ he said.
