No relief yet in sight for inflation
Perth recorded annual CPI growth of 8.3 per cent to the December 2022 quarter, second only to South Australia at 8.6 per cent. In fact, prices rose by 3.6 per cent in Perth over the December 2022 quarter alone, almost double the rate for most other states. This is because most families in WA are bearing the full market cost of electricity now that the effect of the state’s $400 household electricity credit has been exhausted.
Prices for domestic travel and accommodation rose an eye-watering 23.9 per cent over the year to December 2022, which is something of a concern given the imperative to reactivate WA’s tourism industry. However, the scope of high inflation in Perth extends into many non-discretionary expenditure categories such as food (+9.2 per cent over the year), housing (+12.8 per cent) and furnishings and household equipment (+9.3 per cent).
The cost of new dwellings purchases rose by 26.4 per cent for Perth over the past year, with rents up 8 per cent. With rental vacancy rates in WA still historically low, and the continuation of cost pressures in the construction sector from labour and supply shortages, neither shows any real of a return to normality.
The scope of inflation across the country, and the extent of price rises across so many expenditure categories will put a dent in confidence that inflation has peaked. Based on these figures, it’s pretty much certain that the RBA will increase the cash rate by at least 25 basis points in February, with more interest rate rises likely over the next few months.
Professor Alan Duncan
Bankwest Curtin Economics Centre