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Supply chain chaos pushes Australian inflation to multi-year highs

February 2, 2022

Supply chain chaos pushes Australian inflation to multi-year highs

Australia’s underlying rate of inflation ticked up to 2.9% in January this year, marking the fastest rate of change recorded in almost eight years.

Australia’s underlying rate of inflation ticked up to 2.9% in January this year, marking the fastest rate of change recorded in almost eight years.

Data from the Reserve Bank of Australia (RBA) showed Australia’s monthly trimmed mean inflation rate climbed 0.4% during the year to sit just shy of 3% – a 7.5-year high. 

The ‘trimmed mean’ measure of inflation removes the 15% of items with the highest and lowest rates of inflation from the basket of goods used to measure price changes, which eliminates unconventional and one-off price swings from skewing the overall data.

These gains were in part due to oil prices, which climbed 2% last week to also reach highs not seen for the past seven years, with strong demand and growing geopolitical tensions in Ukraine and Yemen bidding up prices.

Both Brent and Nymex oil prices last week hit their most expensive level since October 2014, reaching US$91.70 and US$88.84 per barrel respectively.

Movements in the oil price even came with a warning from Chevron CEO Mike Wirth, who cautioned it would not be surprising to see oil hit US$100 a barrel in the months ahead.

For consumers, this meant a household purchasing 35 litres of petrol for their car last week (an estimate derived from ABS data) would have spent more than $200 – almost a record sum in its own right.

Credit growth hits 13-year highs amid interest rate fears

At the end of December, the value of Australia’s outstanding loans was 7.2% higher than at the same time the previous year – its fastest rate of growth in 13 years.

This growth comes amid growing speculation the Reserve Bank of Australia may look to increase interest rates within the next year in a bid to keep inflation in check.

Although most Australian economists believe it is too early to increase interest rates just yet, CommSec noted fear of more expensive mortgages may have prompted would-be homeowners to lock in mortgages now while rates are more affordable.

Sources


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