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Australian annual consumer price index inflation surges to 3.8 per cent in the June quarter

Australia’s inflation TRIPLES in just three months as a lack of international backpackers pushes up fruit prices – and stirs early rate rise fears

  • Annual inflation hit 3.8 per cent in June – triple the March level of 1.1 per cent
  • Consumer price index rose at the fastest annual pace since September 2008 
  • In three months, fruit prices up 4.7 per cent, vegetable prices rose 5.5 per cent

Australia’s inflation rate tripled in just three months as a lack of overseas backpackers pushed up fruit prices.

The annual consumer price index in the June quarter surged to a 13-year high of 3.8 per cent – up from 1.1 per cent in the March quarter.

The pandemic closure of Australia’s border to foreigners is now starting to bite, with farmers no longer able to rely on an army of overseas backpackers during harvest season.

Fruit prices in the three months to June 30 surged by 4.7 per cent as vegetable prices over that same period climbed by 5.5 per cent. 

‘Both rose due to a shortage of pickers, extreme rainfall on the east coast of Australia and Cyclone Niran affecting banana crop yields,’ the Australian Bureau of Statistics said. 

Australia’s inflation rate tripled in just three months as a lack of overseas backpackers (pictured is a stock image) pushed up fruit prices. The annual consumer price index in the June quarter surged to a 13-year high of 3.8 per cent – up from 1.1 per cent in the March quarter

The closure of Australia's border to foreigners is now starting to bite, with farmers no longer able to rely on an army of overseas backpackers during harvest season. Fruit prices in the three months to June 30 surged by 4.7 per cent as vegetable prices over that same period climbed by 5.5 per cent (pictured is a green grocer customer at Lakemba in south-west Sydney)

The closure of Australia’s border to foreigners is now starting to bite, with farmers no longer able to rely on an army of overseas backpackers during harvest season. Fruit prices in the three months to June 30 surged by 4.7 per cent as vegetable prices over that same period climbed by 5.5 per cent (pictured is a green grocer customer at Lakemba in south-west Sydney)

The Reserve Bank of Australia has repeatedly promised to leave the cash rate on hold at a record-low of 0.1 per cent until 2024 but a surprisingly high inflation reading could force its hand. 

Headline inflation, calculated by the Australian Bureau of Statistics, has risen above the RBA’s two to three per cent band for the first time in a decade. 

Cryptocurrency investors are particularly concerned about what higher inflation in Australia will mean for purchasing power, with 79 per cent of the 1,010 enthusiasts  surveyed by cryptocurrency-trading platform Gemini Trust predicting it will be a problem during the next five years.

Jeremy Ng, the Singapore-based Asia-Pacific managing director of Gemini, said Bitcoin, limited to 21million units, was particularly attractive to investors as governments around the world put in Covid stimulus measures.

‘As an asset in limited supply, fast growing cryptocurrencies such as Bitcoin can be a strong inflation hedge against devaluing fiat currencies,’ he said.

‘For this reason, we find many investors hold crypto such as Bitcoin, rather than using them as a means of payment.’

The Reserve Bank of Australia has repeatedly promised to leave the cash rate on hold at a record-low of 0.1 per cent until 2024 but a surprisingly high inflation reading could force its hand

The Reserve Bank of Australia has repeatedly promised to leave the cash rate on hold at a record-low of 0.1 per cent until 2024 but a surprisingly high inflation reading could force its hand

While Sydney is in lockdown for the next four weeks at least, the rest of the world is opening up, which meant an increase in crude oil prices and a 6.5 per cent rise in petrol prices during the June quarter. 

CommSec chief economist Craig James said while the spike in headline inflation would be unlikely to force an early rate rise in 2021 or 2022, the Reserve Bank of Australia was now likely to consider an increase in the June quarter of 2023.

‘With the Sydney lockdown in its fifth week and unlikely to end soon, now is not the time for detailed deliberations on monetary policy settings,’ he said.

EY chief economist Jo Masters said a continuation of Sydney’s lockdown until August 28 would cause the economy to shrink in the September quarter, and reduce inflationary pressures.

Cryptocurrency investors (pictured are Bitcoins) are particularly concerned about what higher inflation in Australia will mean for purchasing power, with 79 per cent of the 1,010 enthusiasts surveyed by cryptocurrency-trading platform Gemini Trust predicting it will be a problem during the next five years

Cryptocurrency investors (pictured are Bitcoins) are particularly concerned about what higher inflation in Australia will mean for purchasing power, with 79 per cent of the 1,010 enthusiasts surveyed by cryptocurrency-trading platform Gemini Trust predicting it will be a problem during the next five years

‘The economy is now expected to contract in the September quarter, with a significant hit to activity in New South Wales from the lockdown, which has today been extended to end August,’ she said.

‘When economic activity is dampened, so too are inflationary pressures and the pursuit of full employment.’

The Westpac bank is expecting Sydney property prices to climb by 22 per cent in 2021, followed by 4 per cent next year.

Melbourne home values were expected to surge by 16 per cent this year followed by another 6 per cent in 2022.

But Westpac predicted median property prices in both Sydney and Melbourne would fall by 6 per cent in 2023. 

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