Inflation soars, but it's not as bad as it seems

追加: 2026-05-07

[00:00:09]Hello and welcome to Dollars and Cents, the Australia Institute podcast, where we're talking about just what the hell is going on in the economy. I'm Eleanor Johnston Leak, the senior content producer here at the Australia Institute. And as always, I'm talking to our chief economist, Greg Jericho.

[00:00:24]Hello, Greg.

[00:00:24]>> Hi, Eleanor.

[00:00:25]>> How are we doing today?

[00:00:27]>> I'm not good. I've got a bit of a flu.

[00:00:29]So, I've decided the best thing to do is to get into a very small compact room with you.

[00:00:35]>> Spread my >> So, we're going to get through this very quickly and then I'm going to go home to bed.

[00:00:42]>> Yeah, sounds good. Well, I we appreciate your sacrifice and coming in >> and it is also a special uh podcast.

[00:00:48]>> It is a special podcast. We couldn't keep you away from our normal producer Angus.

[00:00:53]>> Oh, I thought you were talking about the topic. Oh, yeah. No. And so we're going to be quick and >> we're going to be quick because I'm going to be editing it today and I'm nowhere near as fast as Angus at editing the podcast.

[00:01:03]>> But Angus finally having a holiday. So >> welld deserved >> and uh he can torment me next week.

[00:01:10]>> Yeah. Well, we we'll look forward to that then. But also this week is special cuz we have uh a pretty important topic to talk about. We've got some new inflation figures out this week. Greg, inflation has soared to its highest level in almost 3 years as the fuel crisis bites, but we are being warned that it will climb higher as the economic aftershocks from the war in the Middle East continue.

[00:01:33]>> This is the first rate on inflation that takes into account the Middle East conflict and the spike in oil prices that we've seen. This hefty price that Australians are paying for the war in the Middle East will continue to reverberate around our economy, whether it's its impact on prices or on economic growth. The Aussie dollar was already falling at 11:30 when the March inflation data hit the screen. And then the slide continued when the headline inflation rate that is including fuel was a bit less than economists had penciled in. Apart from diesel and petrol, inflation is pretty much under control really. The question is, does the RBA, when they're making their rates decision, take a really long-term outlook, say this is coming globally.

[00:02:10]This isn't something that raising the interest rates on the mortgages of anyone watching at home is going to change. Fuel is one of those things that many Australians have to spend money on.

[00:02:20]So, how does jacking up their mortgage rates and their interest rates stop them spending money? It just takes money out of their pocket.

[00:02:27]>> These were ones we were all kind of waiting for because uh as we remember, the last ones were February, which kind of missed all of the uh real impact.

[00:02:37]>> I think when we talked about it, we said, "Yeah, these figures don't actually include the Iran war that just started."

[00:02:45]>> Yeah. I mean, uh those figures, you know, all figures are looking in the past, but they were really looking in the past. You know, it was it was of a world that uh was no longer >> didn't exist anymore.

[00:02:56]>> Exist. It was a world where Iran and America and were at peace and well sort of they weren't bombing each other anyway.

[00:03:05]>> Um so we knew that these figures when they came out were going to kind of be nasty.

[00:03:11]>> Yeah.

[00:03:12]>> And they are they Yeah. What what are the figures?

[00:03:15]>> Um so we saw a jump in annual inflation from 3.7% to 4.6%.

[00:03:21]>> Which is a massive one-mon jump. And if you just look at the monthly figures in the month of March, uh prices on average rose 1.1%.

[00:03:34]>> Which, you know, if you were to if that was to happen every month, we'd be having inflation over 12%. Which, you know, just gives you a sense of how abnormal and huge that jump was.

[00:03:46]>> Good news is it actually was a little bit less than some economists were expecting. They were thinking it might have got close to five. Yeah.

[00:03:52]>> But also the the good news is it really was just due to one thing.

[00:03:58]>> Yeah. Well, I'm assuming everyone will be thinking fuel prices. Can we dig deeper into the numbers and know how much of it is actually driven by the fuel price?

[00:04:05]>> Yeah. Fuel prices alone in uh in March rose 33%.

[00:04:13]Which is Yeah. Um I'm a little bit disappointed because last last month when I was looking at the figures I tried to anticipate the increase and I I went for 30%.

[00:04:24]>> I just missed it.

[00:04:26]>> But all up what that means is because of the increase in petrol price was so huge >> that it accounted for almost all about 90% of all of the increase in overall prices in March was due to >> petrol prices. And I was saying before the inflation in March went up 1.1%. If you take out petrol prices, they only would have gone up 0.1%.

[00:04:51]>> Yeah. So, and petrol prices have dropped a little bit recently because of the um is it fuel excise?

[00:04:57]>> Yeah. Actually quite a lot. They've pretty much now because of the one because of two things. the the fuel excise and also world oil prices have sort of not really settled although they've just started going up a little bit more because Trump's a madman.

[00:05:12]>> Um but yeah, the fuel work size h havinging really dropped and so overall as we speak today >> um unled petrol is basically >> at around where it was before the war with Iran started. In fact, even a little bit lower. What complicates it of course is diesel. If you have a diesel car or truck, you would know diesel prices have not come down. And so that also goes into the overall figure as well.

[00:05:39]>> Yeah. But that cut um well that fuel excise changes but won't be included in these figures.

[00:05:45]>> No, they'll be in next month's figures.

[00:05:46]So again, this is why, >> you know, it's always um a bit silly to just look at one month's inflation and go, "Oh god, inflation's out of control." It's like, well, what caused it? It was that 30% rise in petrol prices. We know petrol prices have come down about 30% in April. So, it's going to cancel out it itself. And so, does that mean inflation's all solved because of April? No. But it doesn't mean that inflation was terrible because of what happened in March. So, >> um, a lot of noise. But the good news was um that really when you sort of strip everything back and get rid of all of the sort of one-off things, inflation was pretty nice and steady >> um in in March. Uh when we look at what the Reserve Bank calls the the underlying inflation, the core inflation.

[00:06:44]>> Yeah. Yeah. Well, speaking of the Reserve Bank, they're meeting what? Next week. And >> Yeah, next week.

[00:06:49]>> Yeah. Everyone's kind of saying that the RBA is going to raise interest rates and using this these inflation figures as a reason to do so.

[00:06:58]>> Yeah. The the odds the market's predicting basically about a 75% chance of a rate rise which is >> in sort of um interest rate terms pretty likely means it's pretty likely. Um the annoying thing for us um certainly in what we've been arguing is that really the inflation figures didn't actually change anything. It it was a case of uh >> everyone's just locked into this sense that oh the Reserve Bank wants to look tough on inflation so that's why it's going to raise interest rates and and these figures kind of just confirm that oh they'll have to do something. But as listeners will know, we've been saying, "Hey, RBA, maybe hold off because what drove those price rises?" Petrol. What's something that you kind of can't avoid having to pay? Petrol.

[00:07:50]>> Yeah. What's something that the price won't change if you increase interest rates?

[00:07:54]>> Yeah, petrol. Um so look there have been some reports today suggesting oh maybe the reserve bank might wait and see because also what we know is okay next week the reserve bank meets the week after is budget >> true.

[00:08:11]>> So we've not only got the uncertainty of what the hell is happening with um the straight home wars and all of that.

[00:08:17]We've also got the uncertainty of not knowing what's in the budget. So why not wait six weeks and and see. Yeah. in 6 weeks, you know, in the middle of June, they will have more information about what's happening with oil. They'll know what's all in the budget. They will have got the wages data from March. So much more data. So much more of understanding what's going on.

[00:08:39]>> Yeah. Well, going back to your point you bring up earlier about um the underlying inflation.

[00:08:45]>> Yeah. There's a measure called the what we call the trim mean, and they call it trimmed because basically it trims the top 15% and the bottom 15%. So the 15% biggest rises, the 15% biggest falls to kind of get that middle 70%.

[00:09:00]>> Where they're kind of saying, well, if that's going up and down, that basically means you can't say it's, oh, it's just due to oneoff things. It's kind of, >> oh, it's sort of reflective of the the middle ground in a sense. And that was flat. That was flat at 3.3%. It was 3.3% in February. It was 3.3% in March. So that really gives us a sense that okay yes the CPI the consumer price index that shot up to 4.6 but obviously it was just due to petrol >> everything else kind of steady and that again is what the Reserve Bank kind of looks at because not that they're targeting that figure but it gives them a sense of oh is inflation kind of out of control? Is inflation really rising?

[00:09:45]>> Yeah.

[00:09:45]>> And it's not. Okay. They'd like it to be below 3%. But again, it's it's all seems to be a bit steady. So, you know, what are you really worried about? Are we do we need a rate rise because it's at 3.3% and you'd like it below three?

[00:10:02]>> You know, that seems to be a bit harsh, especially when we've already had two rate rises. Yeah.

[00:10:07]>> And the impact of those hasn't flowed through really into the economy yet. And also when I guess yeah people are already struggling due to these high fuel prices which are out of the RBA's control.

[00:10:17]>> Yeah. And even though the prices have come down that doesn't take away the the impact of them going up. You know it's not like in in March people like oh I'll just stop driving the car and wait for the prices to come down in April. It's not like >> anyone for a start knew that was going to happen. Petrol is not a thing like oh I'll wait for the sales you know really.

[00:10:38]I mean, you might have cheap ass Tuesday or things like that, but you know, in CRA, we don't. Um, but prices were up everywhere. That hurt households almost to the extent of another rate rise in March.

[00:10:52]>> And yes, it's come down, but that's just got us back to where we were in February. It's not like we're suddenly looking at petrol prices and go, "Wow, it's so cheap. I can afford to go spend a JB Highfire or wherever." It's just uh we're kind of back to where we were.

[00:11:06]>> Yeah. And you brought up a point in your column in the Guardian this week. We're still going to see flow on effects from this fuel crisis um regarding like fertilizer and food costs. And you know that's just another reason why the RBA should wait to see what happens.

[00:11:20]>> Yeah. because and this was something we also saw um with the Russian invasion of Ukraine a similar impact where it wasn't just oil and gas prices it was fertilizer prices and things because not because of fertilizer but because of some of the things that go into the making of fertilizer >> y >> um that come through the straight of homos that means those prices go up well what is fertilizer used for food so that means food prices will inevitably go up and also what we're going to See, and we're already starting to see it, is that, as we saw with Russia invading Ukraine, companies around the world were like, "Oh, everyone thinks inflation's going up.

[00:12:02]>> Let's take advantage of that. If you're woollies or coals or whatever, you can raise prices on milk by whatever."

[00:12:09]>> Does anyone really know how much of that is due to increased fuel costs or increased whatever? It's it's a bit of a black box. Well, we did some research about the inflation. Well, we here at the Australian Ship, not me personally, did some research about the uh inflation following following the invasion of Ukraine. And what was the percentage or increase there? What was the impact?

[00:12:32]>> Oh, it was I mean I think about from memory about 69 70% of it was due to profits.

[00:12:38]>> Yeah.

[00:12:38]>> Yeah. Of the increased um inflation was due to profits. And that's the worry we're going to see here because often while you always hear these reports of oh fertilizer prices are increased the actual share of that that goes into the cost of whatever whatever food is often a bit overstated. It doesn't need does just because fertilizer goes up 20%.

[00:13:01]Doesn't mean the cost of whatever food is using that fertilizer has to go up 20%. Cuz it's not 20% of your entire cost.

[00:13:09]>> Yeah. And that's the problem. That's where we see it. An interesting thing is I've been sort of tracking the share prices of companies since the the war.

[00:13:20]>> And obviously Santos and Woodside doing very well. Aole doing really well. Uh Walworth's doing okay. In fact, doing a lot better than the banks and and other places. And and I think it's because Walworth also has a lot of petrol stations as well.

[00:13:35]>> That's true. Y >> but there is this sense that uh this increases in prices. We saw what happened during the Russian invasion Ukraine. It didn't hurt their share price. It didn't hurt their profits. And the concern for us is that it's going to do that again. So hopefully the AC with its new pricing powers uh that it didn't have back then um is able to keep a bit more of an eye on it. But we certainly will be because you can't trust them.

[00:14:03]>> No.

[00:14:04]U another thing that you mentioned in your column this week, you talked about tradable versus non-tradable items and that that's something that the RBA looks at um when talk like looking at whether to change interest rates. Can you just tell us basically what that is?

[00:14:20]>> Yeah, there's a lot of things that we buy here in Australia that the price isn't determined by Australians in a sense. It's is determined by the world market and a classic is petrol.

[00:14:31]>> Yeah. You know, petrol prices didn't go up because we suddenly wanted a lot more petrol because of what's happening on the world market. And there's a lot of things that you wouldn't even think of, but things like lamb, beef, a lot of food stuffs, the actual price is determined by the world because we're an exporting nation and companies a bit like we see with gas. If they can get a good price overseas, then that's where they'll go.

[00:14:57]>> So, I'm assuming these are the tradable items.

[00:14:59]>> Yeah. These are the tradable items and that shot up in in March because the big tradable item is petrol. But non-tradable items are generally a lot of services that are done here like the hairdressers. There's no world marketport that no. And so a lot of services and a lot of things like uh insurance uh like education costs, they're all determined basically just within the confines of Australia. And so you could in a sense say well the Reserve Bank doesn't have much control over the tradable prices.

[00:15:34]>> Yeah, >> they are caring a bit more about what's happening with the non-tradable things.

[00:15:40]What's happening with the prices in Australia is are they seeming to be out of control and and again in in March they went down or the growth of them went down. So >> for non-tradable items.

[00:15:50]>> Yeah. For non-tradable items. So it's a sense of >> RBA can look at the big figure and go oh wow inflation's at 4.6%. 6%. We need to stomp on that. But if they look at the core inflation, if they look at what's actually driving those prices and realize these are things outside of our control, why would we then raise interest rates?

[00:16:12]>> Yeah. Well, I would I would hope that the good folk at the RBA would, you know, dig into the details a little bit more, dig into the data.

[00:16:20]>> Yeah. dig into the data and then they decide, yeah, but uh the the risks are on the upside and so we decide we should increase them. Yeah, it's >> you don't have much hope then.

[00:16:32]>> Look, I I I do have a little bit. I don't know why, but I do >> only because with the budget being the week after, I think that gives them a really good excuse to hold off. Yeah.

[00:16:43]>> Even though the market, as I say, at the moment expects them not to. And also I think as we said last month when we were looking at the inflation figures we point out actually one of the reasons why inflation even sort of went up a little bit last month was because of all what was happening with the electricity rebates and there was a lot of noise there because a year ago we had rebates now we don't and it made it look higher than it is. This one if we stripped out the petrol prices inflation would have actually gone down. annual inflation would have fallen.

[00:17:15]>> Yeah.

[00:17:15]>> Uh to about 3.5%.

[00:17:18]So it's kind of like seems like it's doing what you want it to do. Why? You know, if they if they raise rates next week, that'll be three meetings in a row where they've raised rates. Now, >> inflation is not out of control. Why are you acting like it is?

[00:17:34]>> You know, do you really want a recession? Is that what you're aiming for? And you'd hope not.

[00:17:39]>> Well, I guess we'll just have to see what happens next week. And I'm sure we'll talk about it after the meeting.

[00:17:45]See what happens.

[00:17:46]>> Next week is going to be a big one because it'll not only be post interest rates, it'll be pre-budget. There will be so much to talk about. We've had lots of uh news this week about is there going to be gas taxes, there not?

[00:18:00]Capital gains tax and all things else.

[00:18:02]Fortunately, we really uh don't have time this week to go in them. Next week with Angus back, we will have a bit more time to >> Yeah. Uh because Elanor actually has another job besides uh besides podcast editing.

[00:18:14]>> Podcast editing.

[00:18:15]>> Yeah. But happy to jump in when needed.

[00:18:17]Yeah.

[00:18:17]>> And so we will be back though with that next week with all of that great discussion. Hopefully about the Reserve Bank being sensible and hopefully some good news about what might be in the budget. But we'll have to wait till then. But this episode, Dollars and Cents, was recorded on Thursday the 30th of April. That means tomorrow is May. Oh my god.

[00:18:40]and some things may have changed. You can read my column which delves into what actually was driving inflation in March on the Guardian Australian website and the Groconomics page. But for all other things including some analysis of inflation, what's going to be in the budget, what's not going to be in the budget, and some other great columns, head over to the point.com.au and get some fantastic reading. And I think we have our podcast all on there as well somewhere. Yes, we do. So you can find this podcast, Follow the Money, After America, all there. Great site. Check it out. As always, our music is from Blue Dot Sessions, everyone. Have a great week. Don't catch a cold like I have.

[00:19:22]Good luck, Eleanor. And we'll see you all next week.

[00:19:26]>> See you.