COST OF LIVING CONTINUES TO RISE AS AUSTRALIANS FEEL THE PINCH

Mortgage interest charges were responsible for the greatest increase in living costs over the December quarter for employee households, data released by the Australian Bureau of Statistics yesterday shows. This uptick in costs follows decisions by mortgage lenders to pass on consecutive cash rate rises by the Reserve Bank of Australia which saw it increase by 300 basis points or 3 percent in 2022.

The statistics, showing price increases across all five Living Cost Indexes (LCI) in Australia — the largest rise since the September 2000 quarter — paint a picture of households under increasing pressure to balance budgets while maintaining their current lifestyles.

While interest rates accounted for a 26.6 percent rise, Recreation and Culture, including travel rose by 5.5 percent over the holiday period, followed by Housing at 2.2 percent and Furnishings, household equipment and services at 1.8 percent.

National electricity prices also increased as the Western Australian Government’s $400 electricity credit offer came to an end. However, this was mitigated by the Queensland Government’s $175 Cost of Living rebate which came into effect in September last year. The Tasmanian Government has also introduced a $119 Winter Bill Buster electricity discount for concession households.

The RBA board is due to meet next week for the first time this year with most experts predicting a further rate rise of 0.25 percent.

Australia’s commodity-rich economy recorded its weakest growth momentum since the early 1990s in the second quarter, as consumers and businesses continued to feel the impact of high interest rates, with little expectation of a reprieve from the Reserve Bank of Australia in the near term.

The economy grew 0.2% in the second quarter from the first, with annual growth running at 1.0%, the Australian Bureau of Statistics said Wednesday. The results were in line with market expectations.

It was the 11th consecutive quarter of growth, although the economy slowed sharply over the year to June 30, the ABS said.

Excluding the Covid-19 pandemic period, annual growth was the lowest since 1992, the year that included a gradual recovery from a recession in 1991.

The economy remained in a deep per capita recession, with gross domestic product per capita falling 0.4% from the previous quarter, a sixth consecutive quarterly fall, the ABS said.

A big area of weakness in the economy was household spending, which fell 0.2% from the first quarter, detracting 0.1 percentage point from GDP growth.

On a yearly basis, consumption growth came in at just 0.5% in the second quarter, well below the 1.1% figure the RBA had expected, and was broad-based.

The soft growth report comes as the RBA continues to warn that inflation remains stubbornly high, ruling out near-term interest-rate cuts.

RBA Gov. Michele Bullock said last month that near-term rate cuts aren’t being considered.

Money markets have priced in a cut at the end of this year, while most economists expect that the RBA will stand pat until early 2025.

Treasurer Jim Chalmers has warned this week that high interest rates are “smashing the economy.”

Still, with income tax cuts delivered at the start of July, there are some expectations that consumers will be in a better position to spend in the third quarter, reviving the economy to some degree.

“Output has now grown at 0.2% for three consecutive quarters now. That leaves little doubt that the economy is growing well below potential,” said Abhijit Surya, economist at Capital Economics.

“But if activity does continue to disappoint, the RBA could well cut interest rates sooner,” Surya added.

Government spending rose 1.4% over the quarter, due in part to strength in social-benefits programs for health services, the ABS said.

COST OF LIVING CONTINUES TO RISE AS AUSTRALIANS FEEL THE PINCH

If it feels like everything is more expensive right now, that’s because it is

Excluding the Covid-19 pandemic period, annual growth was the lowest since 1992