The price of fuel climbed a whopping 32% in 2021, putting steady pressure on consumers’ wallets throughout the year, the Reserve Bank of Australia has found.

In its February Statement on Monetary Policy, the central bank said inflation had picked up faster than expected, with a handful of key goods – such as fuel, new dwellings and durable costs – spurring much of the growth.

New dwelling prices climbed 4.2% over the year as builders passed on the higher cost of materials – up 12% in 2021 – to consumers, while consumer durable prices lifted 1.5% in the December quarter alone.

That’s the strongest quarterly increase for these goods since 2009.

Meanwhile, the 32% lift in fuel prices marks the single largest annual increase since 1990.

And while these goods made outsized contributions to overall inflationary data, the RBA cautioned inflationary pressures were also broadening – three-fifths of the CPI basket had annualised inflation over 2.5% for the year, up from two-fifths prior to the pandemic.

The central bank also raised its inflation forecasts for the next two years, and now expects inflation for the year ending December 2023 to come in at 2.75%, rather than the 2.5% previously anticipated.

“The forecast profile for underlying inflation is noticeably higher in the near term, reflecting stronger pass-through of upstream cost pressures to consumer prices than was assumed in the November Statement,” the RBA’s statement noted.

“Underlying inflation is forecast to increase to 3.25% by mid-2022 before easing as international and domestic supply chain pressures subside. 

“Further out, the tightening labour market and resulting lift in labour costs is forecast to sustain underlying inflation in the top half of the target range of 2-3%.”

This inflationary pressure comes as the US battles to contain its fastest rate of inflation in almost 40 years, with the Federal Reserve already signalling plans to raise rates multiple times this year to cool the economy down.

Prices bolted 7% in the US last year, with core inflation – a measure that excludes changes in volatile fuel and food prices – hitting an annual rate of 5.5%.

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Sources

• Reserve Bank of Australia, Statement on Monetary Policy – February 2022 Inflation
• Reserve Bank of Australia, Statement on Monetary Policy – February 2022 Economic Outlook
• The Guardian, Highest US inflation in 40 years signals end of ultra-cheap money