Tuesday, November 15, 2011

You wouldn't read about it, much. Living costs are slowing

Living costs are no longer soaring beyond control. The latest personal indexes from the Bureau of Statistics show the cost increases faced by wage earners, pensioners and welfare recipients have all dropped back from 0.9 per cent in the June quarter to a more modest 0.6 per cent in the September quarter, the same as the official rate of inflation.

The difference means that rather than climbing at an annualised pace of 3.6 per cent, living costs are climbing at an annualised 2.4 per cent, the lowest pace since the financial crisis in 2009.

Self-funded retirees are the only identified exception. Their living costs climbed 0.8 per cent in the quarter, an annualised pace of 3.2 per cent, reflecting in particular seasonal increases in the cost of international holiday travel and accommodation to which they are more exposed than other groups.

The results cast doubt on those of private surveys that have pointed to crushing living costs and create space for the Reserve Bank to cut interest rates again without stoking inflation.

The cost of food fell in the September quarter led down by substantial slides in the prices of fruit, vegetables and meat. In the past year the price of milk has fallen 10 per cent. Age pensioners are highly sensitive to such changes spending $21 out of every $100 on food.

Less welcome was 7.8 per cent increase in the price of electricity in the quarter, but it was an annual increase much more modest than the 12.8 per cent the year before...

The lower measures of living costs reflect updated estimates of what households actually spend money on introduced in the September quarter. The Reserve Bank believes the previous estimates, which were six years out of date when updated, overstated inflation by 0.25 percentage points.

The Bank expects the carbon price to add 0.75 points to inflation in the year after its introduced in July 2012 and nothing in the year that follows. Its forecasts have inflation excluding the carbon price remaining at 2.5 per cent for the next two years.

Other figures released yesterday show the price of petrol fell 2.5 cents per litre in the past week to 141.6 cents – a ten-week low.

The average credit card limit grew by just 1.5 per cent in the year to September, the slowest pace on record. The number of credit card accounts fell 15,000 in September, the first September slide in records going back 17 years.


June quarter living costs:

Working families: 0.9%
Unemployed, students 0.9%
Age Pensioners 0.9%
Self-funded retirees: 1.0%

September quarter living costs:

Working families: 0.6%
Unemployed, students 0.6%
Age Pensioners 0.6%
Self-funded retirees: 0.8%

ABS 6463.0

Published in today's SMH

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