One year on from the carbon tax Australia’s cost of living has flatlined.
New calculations by the Bureau of Statistics show the cost of living for so called working families almost plateaued in the year to September, climbing just 0.9 per cent. The increase is less than half the official inflation rate of 2.2 per cent and less than one third the rate at which wages are climbing.
The Bureau says its living cost indexes are climbing more slowly than the official rate of inflation primarily because they include mortgage and bank interest charges which are excluded from the consumer price index.
Discount mortgage rates have plummeted from around 6.1 per cent to 5.1 per cent over the past year, slicing about $180 per month off the typical cost of repaying mortgage.
“These figures show the cost of living barely climbing, said BT Financial chief economist Chris Caton.
“And they include the effect of the carbon tax.”
“Many Australian families are getting compensated for that tax. That is, they are being compensated for prices that are scarcely climbing"...
If you are being compensated, it is fair to ask whether your cost of living is really increasing much at all.”
The Bureau’s breakdown shows the cost of living facing households not headed by employees has climbed 2 per cent over the past year, also less than the rate of inflation. Households facing a 2 per cent increase in their cost of living include those headed by aged pensioners, those headed by self-funded retirees and those headed by people on benefits such as NewStart.
“It ought to stop all of the talk about a spiraling cost of living,” said Dr Caton. “But I don’t think it will. For me those stories are mainly media and political beat ups.”
“They cherry pick. It's always electricity, its petrol when it suits them, and then its just one or two other prices. If you look comprehensively across the range of everything consumers purchase, inflation is low and it's been low for a long time.”
Electricity prices are climbing at their slowest pace in six years, advancing 6.1 per cent in the year to September, well down on the annual increase of 18.5 per cent recorded with introduction of the carbon tax one year earlier. Average food prices fell 1.6 per cent over the year to September.
Dr Caton said there was little on the horizon that might push prices up. “A fall in the dollar might put some pressure on prices, but they are less responsive to currency movements than they used to be. Consumers are wary about spending, and new technologies are making price discovery easier. Retailers can’t apply the sorts of margins they once used to without shoppers finding out, and buying goods more cheaply elsewhere.”
The 0.9 per cent increase in the cost of living facing working Australians is a big come down from the 3.9 per cent recorded two years ago after a year in which mortgage rates had been climbing.
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