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The Australian Bureau of Statistics (ABS) released its latest inflation data on August 31, 2023. The Consumer Price Index (CPI) indicator rose 4.9% in the 12 months to July 2023, down from 5.4% in June. This is the highest inflation rate since February 2008.
The main drivers of inflation in July were rising prices for food, transport, and housing. Food prices rose 5.7% in the 12 months to July, the largest increase since September 2011. Transport prices rose 3.8%, the largest increase since February 2020. Housing prices rose 1.9%, the largest increase since March 2021.
The ABS said that the inflation rate is expected to peak in the coming months before starting to decline. However, it is likely to remain above the Reserve Bank of Australia’s (RBA) target of 2-3% for some time.
The RBA has already raised interest rates twice this year in an effort to bring inflation under control. It is expected to raise rates again in the coming months.
The rising inflation rate is putting pressure on household budgets. This is particularly the case for low-income households, who spend a larger proportion of their income on essentials such as food and housing.
The government has announced a number of measures to help households cope with the rising cost of living. These include a one-off payment of $250 for low-income earners and a doubling of the low-income energy supplement.
The rising inflation rate is a challenge for the Australian economy. However, the RBA is confident that it can bring inflation under control without causing a recession.
In addition to the factors mentioned above, other factors that have contributed to the rise in inflation in Australia include:
- The war in Ukraine, which has caused energy and food prices to rise.
- The ongoing COVID-19 pandemic, which has disrupted supply chains and caused prices to rise.
- Strong demand for goods and services, as the economy recovers from the pandemic.
The Reserve Bank of Australia is closely monitoring the inflation situation and will continue to take steps to ensure that inflation remains within its target range.
