Inflation rises further in July, cost of living also rising as rate hikes bite
The ABS reported inflation of 1.8% for the June quarter, resulting in an annual inflation rate of 6.1%, the fastest annual increase in 21 years. According to the Melbourne Institute’s Monthly Inflation Gauge, inflation rose by over 1% in July, suggesting that inflationary pressures are likely to continue in the third quarter.
The rise in inflation for July is largely associated with higher utilities and housing-related costs, including an increase in dwelling rents and housing construction costs.
In August, the Melbourne Institute Inflation Gauge was also augmented with new monthly Cost of Living indexes. In contrast to inflation, the Cost of Living captures the financial ramifications of higher interest rates, with housing-related repayments constituting a large component of household expenditure.
Associate Professor Sam Tsiaplias at the Melbourne Institute: Applied Economic & Social Research said, “The results suggest ongoing, broad-based inflationary pressure with higher prices observed for a wide range of goods and services, including utilities, rents, housing construction, food and insurance.”
“In recent months, the cost of living has also increased for pensioner, government beneficiaries, retiree and employee households. The impact of rate hikes has been particularly onerous for the cost of living of employee households, who face additional mortgage repayment pressures. As such, following a period where the cost of living of employee households was below that of pensioner households, the annual cost of living for the former group (5.3%) is now similar to that of pensioner & beneficiary households (5.5%.)”
The Melbourne Institute Monthly Inflation Gauge is designed to provide a timely and accurate monthly measure of inflation in Australia. Based on the ABS methodology for calculating the quarterly consumer price index, the Melbourne Institute Monthly Inflation Gauge estimates month-to-month price movements for a wide-ranging basket of goods and services across the main capital cities of Australia.
The Melbourne Institute Monthly Cost of Living Indexes account for changes in mortgage rates, which are not part of the inflation measure. The indexes are computed for five household types (age pensioners, pensioners and beneficiaries, employees, other government transfer recipients and self-funded retirees).
The Melbourne Institute Monthly Inflation Gauge and Cost of Living report for August 2022 was released at 11am (AEST), Monday 1 August 2022. The report is only available to subscribers.
The next Monthly Inflation Gauge and Cost of Living report for September 2022 will be released at 11am (AEST), Monday 5 September 2022.
The Melbourne Institute Monthly Inflation Gauge is designed to give markets and policy makers a monthly update on inflation trends. Further information can be found here.