The June quarter inflation result — at 0.8%, the lowest since September 2021 — shows an economy where policy failure and lack of competition are increasingly the key drivers of inflation.
While the numbers were welcomed as further signs that the Reserve Bank can keep rates on hold, growth in the Consumer Price Index was still at an annual rate of 6%, down from 7% in the March quarter, and down to 5.9% on an trimmed mean basis, from 6.6% in the three months to March. The easing trend in the data was emphasised by the monthly inflation indicator, which showed a rise of 5.4% in the year to June, compared with 5.5% in May and 6.7% in April.
According to the Australian Bureau of Statistics (ABS), the most significant contributors to the rise in the June quarter were rents (up 2.5%), international holiday travel and accommodation (up 6.2%), other financial services (up 2.5%) and a 1% rise in new dwellings purchased by owner-occupiers. Rents saw the strongest quarterly rise since 1988, especially for apartments.
That’s the result of a generation of policy failure by federal, state and local politicians across tax policy, urban planning and infrastructure and development approval processes, exacerbated by shorter-run factors like the current surge in migration as foreign students and temporary workers return to the economy.
The price surge in international travel, especially to the northern hemisphere, is another area of policy failure. Despite blatant profiteering and capacity reductions by taxpayer-subsidised Qantas, the Albanese government has rejected applications by both Qatar Airways and Turkish Airlines to increase capacity into Australia — all part of the long-running and inexplicable bipartisan pandering to Qantas.
Stamp duty — another area of failure by politicians — was the primary contributor to inflation increase in other financial services. Insurance premiums are also driving up financial services inflation, especially in climate change-prone states such as Queensland (though maybe regional Queenslanders can just keep voting for LNP politicians who think the global heating crisis is a scam, and everything will be fine).
The rate of growth in new dwelling prices did continue to slow this quarter. This reflects lower new demand as well as material costs easing — though dominant construction suppliers such as Boral expect to be able to jack up prices and increase profits.
The overall result set alarm bells ringing at The Australian Financial Review, which has campaigned for punitive interest rate rises to smash the economy and drive up unemployment to curb wage growth. Today it again demanded more rate rises by the Reserve Bank.
The Fin looks fondly to the US where, despite inflation falling to 3% in June, the Federal Reserve overnight lifted rates by a quarter of a per cent to their highest level since the start of the century. But it also upgraded its view of US economic activity to “moderate” in its post-meeting statement, from the “modest” characterisation in its June meeting statement — the third upgrade in four months.
“Sticky” inflation is now the lingering justification for interest rate rises — inflation that hasn’t proved amenable to bashing demand repeatedly. That’s because the cause lies with poor policymaking and corporations exploiting it, not consumers.
Seems to me that one of the biggest problems in Australian politics, especially at the Federal level at the moment, is that Oppositions don’t pick difficult issues on which to oppose govts, or present alternative policies or ideas. They just go for the stuff that creates headlines, and of course the media does not do long-read stuff that requires a level of thought, instead always looking for conflict for clickbait headlines. It’s a happy relationship that serves the purposes of both parties, but does little to inform the audience about anything of real importance.
Watching one of the commercial channels on the NSW South Coast last night, when a short news update came on the screen. The graphics announcing the news break showed a series of flashing lights – first on fire trucks, then on an ambulance. Told me all I needed to know about the bulletin to come.
It does seem we have returned to one of the original activities of journalists – ambulance chasing – even if it is now hi-tech.
Similar has been afflicting ABC News, especially News24 and ABC Online ‘News Just In’ and sections, it’s all tragedy, trauma, violence etc., inc. regions too….. no analysis nor solutions, just whining about non-issues to rev up the oldies….
That’s because on economic issues there’s barely daylight between the two majors.
They have some disagreement on things like welfare and public services, but they’re mostly semantic matters of “how cruel is too cruel” and “how much privatisation can we get away with” rather than anything of substance or principle.
Morrison over stimulated the building industry which caused a lot of the supply problems including labour. Job keeper was the other problem,all they had to do was legislate the expectation of repaying the over payments.
Koala bears, why? The protected species we have become, due to influential and ageing above median age vote vs. working age and youth.
Working age and PAYE tax paying cohort passed the demographic sweet spot over a decade ago, now propped up by temporary ‘immigrants’ etc. counted into the population, with limited work rights.
With increasing constraints on working age demographics, it suggests not only potential for improved wages and award conditions, but that interest rate rises alone are too blunt and lack focus e.g. they don’t or may not work anymore on (perceived or alleged) wage inflation?
I feel there has been shift in the world’s economy. We now have geopolitical issues, global warming, debt, supply chain issues and greed which I feel the FED and CBs are ignoring. They are running out the same dribble they did years ago. It is now up to savvy governments (if there are any) to create meaningful solutions to modern day problems. Sticky inflatio and pivot are just words used to distract us from what is truly going on.
Inflation is correlated with growing inequality where comparative political systems indicate inflation benefits wealthy citizens since liquid capital power inflates identity politics in relation to purchasing a standard of living and quality of life in ever more distinct and novel ways such as VR headsets and other instruments to excess services for a standard quality of life within a developed economy, which may become out of reach for most citizens within a generation.