The Consumer Price Index is a key economic indicator that reflects price changes over a period of time. In Australia, it provides a comprehensive view of inflation and its impact on households, helping governments and the private sector make strategic decisions. In this article, we will present the latest updates to the Consumer Price Index, including changes in some important economic categories such as electricity, food, and rents.
Updates to the Consumer Price Index weights
In January 2025, the Consumer Price Index weights will be updated to ensure they better represent current household spending patterns. This annual update reflects changes in household consumption patterns more accurately, and contributes to improving the accuracy of economic forecasts. This update not only covers the goods and services that citizens consume on a daily basis, but also reflects shifts in spending priorities. The new weights will be published at the same time as the release of the monthly CPI for January, which will be released on February 26, 2025.
Monthly CPI Increase
By the end of December 2024, the monthly CPI increased by 2.5% year-on-year, compared to a 2.3% increase in November of the same year. This growth reflects significant changes in prices for a wide range of goods and services consumed by households. Despite this increase, changes in some categories may contribute to limiting the negative effects of this inflation on citizens’ lives.
Core Inflation: The Impact of Temporary Changes
Core inflation is measured by excluding some volatile categories such as fuel and vegetables, as these categories have a significant impact on daily price changes. The annual truncated inflation rate was 2.7% in December, down from 3.2% in November. This figure reflects the impact of temporary factors that had raised prices in the previous period, such as higher electricity and car fuel prices.
Electricity Prices: Significant Decrease
Electricity prices are a significant factor that significantly impacts the cost of living in Australia. According to the latest data, electricity prices fell by 17.9% over the 12 months to December 2024. This follows a further 21.5% fall in November, a direct result of the implementation of the Commonwealth Energy Bill Relief Fund (EBRF) rebates that began in July 2024. These rebates have helped reduce the financial burden on households, which has had a positive impact on reducing the increase in living costs.
Despite the annual decline in electricity prices, there are underlying effects as the December 2023 electricity price decline no longer contributes to the price movement for the month. However, the 1.5% monthly increase in prices in December was due to the implementation of the second tranche of EBRF rebates, which reduced electricity prices for households in all states and territories.
Food: Continued increase but gradual decline
Food and non-alcoholic beverage prices rose 2.7% over the 12 months to December 2024. However, this was smallest increase since December 2021. This change reflects a slowdown in price increases, due to significant declines in fruit and vegetable prices. Although prices for these products have increased in recent years, December 2024 saw a monthly decline of 1.4%. This decline reflects the effects of seasonal factors that have affected prices of fruits such as berries and grapes.
Housing and rental prices: Slowing growth
The new home sector saw a slowdown in growth. New home prices rose 2.3% in the 12 months to December 2024, smallest increase since July 2021. This slowdown in growth was due to builders offering incentives and promotions to attract customers in a market that is suffering from a recession. Despite this slowdown, new home prices have continued to rise slowly, reflecting the challenges of the real estate market.
Fuel Prices: Global Fluctuations Affect Local Prices
On the rental side, rental price growth continued to rise, increasing by 6.2% in the 12 months to December 2024. However, this was lower than the increase recorded in November 2024 (6.6%). Despite the 0.3% monthly increase in rental prices, price growth has started to slow due to increasing vacancy rates in most capital cities.
Motor fuel prices fell by 1.4% in the 12 months to December 2024, following a larger 10.2% decline to November 2024. This decline was due to the impact of lower global oil prices on local markets. However, despite the annual decline in prices, fuel prices saw a 3.8% monthly increase in December, reflecting the effects of global price fluctuations.
Travel and accommodation: Sharp price increases
Despite falling by 0.1% year-on-year, prices saw a sharp increase of 11.5% month-on-month in December 2024. This increase was due to higher international airfares as the holiday season approached. Many Australians travelled internationally, contributing to the significant increase in travel and accommodation prices.
Forward outlook
Australia continues to face economic challenges due to continued increases in some price categories such as rents and utilities. However, recent data suggests that the government is working to introduce measures to support households, such as electricity rebates, which have helped reduce the burden. The impact of these policies is expected to continue to improve the purchasing power of Australian households in the near future.
At the same time, inflation in some sectors such as food and rents will continue to pose a challenge for the government. Wage control and government spending policy are likely to continue to influence the economic outlook in the coming years.
