Inflation in Australia rises to 7.8 per cent

New data from the Australian Bureau of Statistics (ABS) showed that the Consumer Price Index, or CPI, rose 1.9 per cent in the December 2022 quarter.

The figure largely beat market expectations, which had been pricing in more moderate growth.

A woman works in the supermarket. — Progress to close the gender pay gap between Australian women and men has stalled (Janie Barrett)

It is the fourth consecutive quarter to show a rise in the cost living greater than anything seen since the introduction of the Goods and Services Tax (GST) in 2000.

The CPI is anecdotally used to measure the rate of inflation in Australia as it evaluates the change in cost of a standard basket of goods and services.

Today’s hotter-than-expected inflation figure now increases the likelihood that the Reserve Bank of Australia (RBA) will increase rates when it meets on the first Tuesday of February.

A busy Burwood Westfield Shopping Centre in Sydney. — Higher inflation reduces the buying power that consumers have – meaning everyone is paying more for the items they already buy. (AFR)

“We certainly hope that (inflation) has peaked,” he said.

“The whole world has been impacted by the Russian invasion of Ukraine, and we are not immune to it.”

Albanese did not explicitly say Australia if would avoid slipping into a recession.

“I think our economy still has very strong fundamentals,” he said.

Anthony Albanese has said modelling shows it is likely inflation has peaked. (Nine)

Inflation measures the prices of the goods and services that households buy.

In Australia, this is also known by the term Consumer Price Index, or CPI.

Okay, tell me more about the CPI

The CPI measures quarterly changes in the price of a “basket” of goods and services which account for a high proportion of expenditure by metropolitan households.

A lot of items, too many to list here.

But the basket covers a wide range of goods and services in 11 categories: food and non-alcoholic beverages, alcohol and tobacco, clothing and footwear, housing, furnishings, household equipment and services, health, transport, communication, recreation and culture, education, insurance and financial services.

The “basket” fundamentally attempts to replicate the real-world spending of the average Australian household.

So what does this all mean?

With every inflationary rise, your buying power goes down, because you’re paying more for the items you habitually purchase.

Some Australians may receive pay rises – which maintains their buying power – but many are left affording the same times with the same money available to them before rising inflation.