Australia’s inflation rate has increased, albeit by a small amount, due to a hike in the price of petrol as well as the recent drought-related food shortages.
With the recent fires setting Australia ablaze, the country’s food supply is threatened by damage done to the locally sourced fresh produce. Bruce Hockman, chief economist at the Australian Bureau of Statistics (ABS), commented that prices for several food products were the result of the drought conditions and decreased seasonal supplies this quarter.
During the December quarter, total food inflation rose 1.3%, with considerable price increases of milk at +1.7%, cheese at +2.4%, beef and veal at +2.9% and pork at +4.7%. During this month, consumer prices increased 0.6%, accumulating to a 1.8% rise over the year.
The Reserve Bank measures core inflation by eliminating variables such as fuel and food, which resulted in a figure of 0.4% over the quarter and 1.6% for the year. Core inflation has been below RBA’s forecast of 2 to 3% for sixteen quarters in a row.
According to the ABS, the dominant spikes in price during the quarter came from automotive petrol at +4.4%, fruit at +6.8%, as well as domestic holidays, travel and accommodation at +7.3%.
At the same time, the cost of international holidays, travel and accommodation fell by -2.9% during the Black Summer. Air pollution also had a negative effect on tourism and local workforce productivity. The rise in demand-pull inflation will continue to have a negative effect on the country’s consumer price index as long as the fires keep burning.