📬Understanding the 3.5% CPI Increase: Key Drivers and Impacts

The ABS report showed that there was a 3.5% increase in the Consumer Price Index from the previous month of June, which had recorded a 3.8% increase.

The major drivers:

Housing (+4.0%), food and non-alcoholic beverages (+3.8%), alcohol and tobacco (+7.2%), transport (+3.4%).

Leigh Merrington, acting head of prices statistics at the Australian Bureau of Statistics, said "from time to time, items that have volatile price change such as automotive fuel, fruits, vegetables, holiday travel generally impact on the rate of inflation in the Consumer Price Index."

Trending behind this are these reasons:

Housing climbed by 4.0% year on year in the 12 months to July, while rents surged 6.9% from 7.1% in June. Since August 2023, new home prices have gained about 5.0% annually as builders pass on higher labor and material costs to buyers.

A helping hand, in Housing in July, from June, was the 5.1% drop in electricity prices, primarily due to new rebates by the Commonwealth and many State governments.

Food and non-alcoholic beverages in terms of inflation were higher in July at 3.8%, led principally by fruits and vegetables, rising 7.5% in the 12 months to July, compared to June's 3.6%.

Why it matters:

Food and non-alcoholic beverages inflation may add to the increased cost of living and erode the disposable incomes of consumer goods. Households with high energy expenses may also benefit from lower electricity prices due to rebates.