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Consumer prices jump but the rise is likely to be a one-off, economists say

Consumer prices have jumped 3.8 per cent over the past year, but most of the rise was due to a few one-off factors that will not continue.

The annual rise was driven in part by a 0.8 per cent increase in prices over the June quarter, but was exaggerated by the effect of big price falls during the initial phase of the pandemic last year.

“Key drivers included the full unwinding of the federal government’s free childcare package implemented in the June quarter last year, as well as a full return from the drop in fuel prices seen in the same quarter,” said Michelle Marquadt, the ABS head of price statistics.

“These ‘base effects’ led to a sharp increase in the annual CPI movement.”

Excluding big one-off price moves, the Reserve Bank’s preferred “core” measures of inflation, such as the “trimmed mean”, rose 0.5 per cent over the quarter and just 1.6 per cent over the year, still below its 2-3 per cent target.

Some of the most significant price rises in the June quarter were for fuel (+6.5pc), vegetables (+5.5pc), fruit (+4.7pc), beef (+3.6pc), electricity (+3.3pc, mostly due to the end of a Western Australian credit) and motor vehicles (+2.2pc).

The ABS attributed the rise in fresh food prices to flooding in growing areas of New South Wales, a shortage of pickers due to international border closures and re-stocking of cattle after the drought that has reduced the supply of animals for slaughter.

Around the nation, Perth households saw the biggest price increases last quarter (+1.9pc), due to rising rents and the end of the household electricity credit, while falling rents helped Melburnians, with the gentlest price rises of just 0.3 per cent.

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