According to the Australian Bureau of Statistics (ABS), inflation in Australia increased by 1.4% in the first quarter of 2023, or 7% annually. This is the lowest quarterly increase since December 2021. Although Consumer Price Index (CPI) prices continued to rise, many of the increases were smaller than those seen in previous quarters.
The most significant increases were seen in medical and hospital services, tertiary education, gas and other household fuels, and domestic holiday travel and accommodation. The annual CPI inflation rate decreased to 7% from 7.8% in December 2022 and 7.3% in September 2022.
While prices for goods such as furniture, household appliances, and clothing fell in the March quarter, automotive fuel prices eased in recent quarters, leading to an annual inflation rate of 7.6% for goods, down from 9.5% in December. However, annual inflation for services rose to 6.1%, up from 5.5% in the December quarter, the highest since 2001.
Despite the lower rate in March, the annual inflation rate still concerns the Reserve Bank of Australia. Anneke Thompson, Chief Economist at CreditorWatch, expects this to result in a further increase in the cash rate after the May 2023 RBA board meeting. Services inflation continues to rise because of higher energy costs, staff shortages driving up wages, and continued demand for travel, education, and rental properties.
According to ABS, prices for medical and hospital services typically rise in the March quarter, as consultation fees are reviewed, and the Medicare Safety Net is reset at the start of the year. Changes in student contribution bands and fees at the beginning of the year caused a rise in tertiary education this quarter. Gas and other household fuel prices rose due to price reviews reflecting higher wholesale gas prices, while holiday travel and major events resulted in price rises for domestic accommodation.
The ABS commentary said that the major events over the past year, including the ongoing war in Ukraine and unplanned outages at coal-fired power stations, partially offset the small price falls for domestic airfares, which followed significant price rises in recent quarters, and resulted in higher prices.
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