A jump in fuel prices has contributed to a broader rise in inflation over the past few months, which could put upward pressure on interest rates.
The official ABS measure of consumer prices rose 0.8 per cent over the September quarter, with prices 3 per cent higher than a year earlier.
The quarterly rise was driven primarily by a jump in fuel (7.1 per cent) and new dwelling purchase (3.3 per cent) costs.
Rising energy costs have caught the attention of Steve Cassidy, who runs a truck mechanic business in Sydney’s west.
He runs a fleet of mobile mechanic vehicles that meet broken-down trucks and other machinery in and around Sydney.
“I think 12 months ago it was $1.20 a litre, and now today I was driving to work and it was nearly $1.60 a litre,” he told The Business.
This week the national average petrol price rose to a 13-year high and is at record levels in some cities.
Mr Cassidy spends up to $2,500 a month on diesel fuel, but said he was passing some of the increased costs on to his customers.
“The fuel has definitely increased but, then again, that’s something that we do on-charge, any travelling fees,” he explained, illustrating how rising fuel costs filter through the economy to other prices.
Mr Cassidy said his power bills had also risen 20 per cent, jumping by 49 per cent over the past 15 months.
“We absorb it because … it’s something that’s in the general running of the business,” he said.
“If it gets much higher, we’ll have to put our labour costs up to cover the costs of running the business.”
That flow through is one reason why the Reserve Bank’s preferred measures of price rises, which exclude the most volatile movements like fuel, rose by 0.7 per cent over the quarter and 2.1 per cent over the past year.
It is the first time in six years that those core inflation measures have been above the bottom of the Reserve Bank’s 2 to 3 per cent inflation target.
The longer high and rising energy charges are sustained, the more they will filter through to broader consumer prices as business are forced to pass their increased costs onto customers.
Mr Cassidy is like most Australians in expecting prices to keep rising, with surveys currently showing that inflation expectations are at a six-and-a-half-year high.
“There’s no two ways about it, and it’s just going to go up, and up, and up,” he said. ABC