Prices rising where they hurt families most
“While overall price inflation is still modest, and should give no reason for the Reserve Bank to lift interest rates further, the rises are occurring where they hurt families most: in food, housing and electricity,” says CTU economist Bill Rosenberg.
CPI rose just 0.3 percent in the quarter, less than most expectations, and 1.6 percent for the year to June.
Rosenberg says that food price rises were equivalent to over half of the increase in the last three months, and similarly for electricity prices. Housing cost rises were equivalent to a sixth of the rise. Though these were offset by falls in car and petrol prices over the same period, these essentials are rising in price much faster than the “nice to haves”. Over the year, food, housing, electricity and transport accounted for almost 80 percent of the price rises.
Housing and energy costs rose 1.2 percent in the three months compared to the 0.3 percent increase in the CPI, and 3.4 percent over the year. By itself, household energy – mainly electricity – shot up 3.7 percent in the quarter and 4.1 percent over the year.
“For low and middle income families, prices are rising in spending areas they cannot avoid. At the same time, for many people wages are barely keeping up with even the headline inflation. According to the Labour Cost Index, 46 percent of wage and salary earners received no pay increase in the year to March to recognise the rising cost of living and to retain staff, and another 21 percent received an increase of 2 percent or less. There is no sign yet that wages and salaries – over three quarters of the income for prime working age households – are sharing in the growth of the economy, and the growth may have peaked,” Rosenberg says.