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Economics update | October 28, 2022
28 Oct 2022
CPI rose 1.8 per cent for September Quarter
The Consumer Price Index rose 1.8 per cent for the September quarter and 7.3 per cent in the year to September 2022. This is the second consecutive quarter with an increase of 1.8 per cent, continuing a string of exceptionally strong CPI rises since the sharp COVID driven deflation seen in June 2020.
Goods continue to be the main driver of inflation, contributing 5.6 per cent of the 7.3 per cent recorded over the last year. The largest contributors in the September quarter were new dwelling purchases (+3.7 per cent), gas and other household fuels (+10.9 per cent) and furniture (+6.6 per cent).
The increase in the cost of new dwellings is a sign of the ongoing supply chain and labour shortages, continuing to put upward pressure on costs in the construction industry. Gas prices remain high and continue to rise with surging international demand as a consequence of the war in Ukraine. Increasing fruit and vegetable prices through the quarter (+4.5 per cent) and year (+16.2 per cent) reflect the ongoing supply chain disruptions from the flooding events on the east coast.
The 1.8 per cent CPI increase for the quarter is higher than expected, with the RBA’s forecast for CPI to peak at 7.75 per cent by the end of 2022 now appearing a little understated, given the ongoing rises in construction, gas, and fruit and vegetable prices. Having slowed their cash rate increase to 25 basis points in October, it is likely the RBA will return to a 50 basis point rise on November 1.
Budget 2022-23
The Labor Government’s 2022-23 Budget projects GDP growth to be 3.5 per cent in 2022-23 before falling to 1.5 per cent in 2023-24. This is one per cent lower than the forecast in the March 2022 Budget and is led by global economic struggles and costs of living pressures.
Business investment is being upheld by a backlog of investment projects and is forecast to reach six per cent in 2022-23 but will slow to 3.5 per cent in 2023-24. The labour market continues to perform strongly, with unemployment rate at a low of 3.5 per cent and is forecast to average 3.75 per cent for 2022-23 before rising to 4.5 per cent in 2023-24.
More details surrounding individual budget items can be found in ACCI’s Budget-in-Brief and Budget-in-Depth.
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