PUMPING US FOR CASH
PETROL PRICES AND PANDEMIC PAIN PUTS STRAIN ON BUDGETS
PETROL and the pandemic have combined to dramatically raise Australians’ cost of living, and the price pain is likely to continue.
Ahead of the federal budget and election, politicians are under increasing pressure to find solutions to households’ expanding expenses but are so far delivering broad statements rather than big announcements.
Economists say many factors pushing up prices are beyond politics, such as the Covid-19 pandemic inflating the cost of goods globally and surging oil prices impacting fuel costs.
Petrol pump prices averaged $1.48 a litre in late 2021 and have recently eclipsed $1.90 in several capital cities. Fuel inflation flows through the entire economy.
A new report from the Australian Automobile Association has found average fuel costs climbed between $20 and $25 a week during 2021 to more than $80 in all capital cities, while overall weekly transport costs have jumped up to $70 amid higher insurance, loan repayments, servicing costs and other expenses.
“Rising fuel prices continue to be a significant contributor to cost-of-living pressures,” AAA managing director Michael Bradley said. He said government policies that further increased transport costs should be avoided.
Households are struggling with cost rises across many other products. Beef prices have spiked 35 per cent since late 2020, lamb prices are up 28 per cent in five years, rents have jumped 25 per cent in five years and 9 per cent in the past 12 months, and most other goods cost more as inflation rises at 3.5 per cent, its fastest rate in years.
Budgeting specialist David Rankin, founder of Sort My Money, said the across-theboard nature of cost-of-living rises was “unprecedented in recent times”.
“Nothing seems to be immune – they’re sweeping increases hitting all demographics and I think everybody is feeling the pinch,” Mr Rankin said.
AMP chief economist Shane Oliver said the pandemic had disrupted global production and supply while demand for goods surged as people couldn’t spend on travel or services.
“Most countries are seeing an increase in the cost of living, and most are leaving it up to central banks to remove stimulus,” Dr Oliver said.
Many countries were raising interest rates and Australia’s Reserve Bank was likely to follow in August.
“Most governments are hoping the problem recedes as people go back to work and more spending rotates back to services,” Dr Oliver said.
Treasurer Josh Frydenberg said households had received more than $29bn in tax relief since the pandemic started, “with $1320 on average flowing over the last six months alone”.
“In last year’s Budget we also made a $2bn investment in childcare which will see an average household with two or more children in childcare more than $3000 better off by the end of 2022-23,” Mr Frydenberg said.
“Under the Coalition electricity prices have fallen by around 10 per cent since December 2018 after doubling under Labor.” Shadow Treasurer Jim Chalmers said Australians who were working hard “just aren’t getting ahead”.
“The costs of essentials like fuel, rent and childcare are skyrocketing at the same time as real wages are going backwards,” Mr Chalmers said.
“We have an open mind to other suggestions to lower the costs of living but Labor already has plans to lower power prices, make childcare cheaper and get wages growing again.”
ING Australia’s acting head of daily banking Matt Bowen said rising rents were affected by several factors.
“Record property prices have made it harder for firsthome buyers to get on the property ladder so many are continuing to rent for longer,” Mr Bowen said.
“And, with borders reopening, there are also ex-pats returning home and international students and new migrants arriving and driving up rental competition.”
Mr Rankin said he did not think the government could do “anything meaningful” to lower living costs.
“I think politicians will promise, but they know they can’t deliver on this, and they know global forces are at play.”
Britain is currently suffering through an energy crisis with inflation at a 30-year high of 5.5 per cent and tipped to soar to as high as 8 per cent, while US inflation is running at a 40-year high of 7.5 per cent.