The Consumer Price Index (CPI) in Australia is one of the most important economic tools used to measure inflation in households, and it includes information about price changes in different categories of household spending. This index is an important indicator for understanding the effects of inflation on the daily lives of Australians. In this quarter, some important adjustments were made that affected the calculations of the index.
Correction to childcare costs in the Consumer Price Index
On 19 November 2024, the Australian Bureau of Statistics announced a correction to the out-of-pocket childcare costs in the Consumer Price Index. Errors in estimating the impact of the government’s childcare subsidy reforms, which took effect in July 2023, caused this correction.
This correction lowered the childcare index by 5.8% and the pre-school and primary education index by 0.4%. This correction contributed to reducing the quarterly movement in the Consumer Price Index by 0.05 percentage points.
Energy Bill Relief Fund Rebates
The Australian Government has introduced rebates from the Commonwealth Energy Bill Relief Fund for 2024 and 2025, in addition to rebates introduced by the State Government from July 2024. These rebates helped reduce household electricity costs in the first two quarters of 2024, September and December. These rebates were part of the government’s efforts to help households cope with rising energy costs, and have had a significant impact on the cost of living for Australians.
Introducing a truncated average table
In the latest edition of the index, a table has been added showing the spending categories that have been truncated to calculate the truncated average in the first quarter of 2024. This table helps provide a clearer view of how changes in spending patterns affect the CPI calculations.
Updating the CPI weights for the next quarter
The Australian Government periodically updates the CPI weights to ensure that the weights reflect current patterns of household spending. These weights will be updated in Q3 2025. With the new figures released at the same time as the January 2025 monthly CPI. This update is important to ensure that the calculations are accurate and relevant to contemporary economic realities.
Monthly CPI
The latest monthly inflation data can be found in the monthly CPI. This index is available to users on the Australian Bureau of Statistics website. It is also closely linked to the quarterly CPI, reflecting subtle economic changes in the short term.
Full Monthly CPI Measure
In a major step towards improving economic data collection. The Australian Bureau of Statistics is planning to release a full monthly CPI measure in late 2025. This release is part of a major transformation programme known as Big Data and Real-Time Insights: Phase 2 (BDTI2), which seeks to improve the speed and accuracy of economic data collection and analysis. Consumer Price Index in Australia: Recent Developments and Inflation Impacts
The Consumer Price Index in Australia is one of the most important economic measures that reflect changes in the costs of daily living. In the first quarter of December 2024. The index witnessed a decline in inflation rates, indicating positive effects of some economic policies.
Annual inflation rate falls
In the first quarter of December 2024. The annual inflation rate for consumer prices fell to 2.4% compared to 2.8% in the previous quarter. This decrease was due to a decline in electricity and car fuel prices. In addition to a moderation in the rise in new housing prices. This change indicates a temporary improvement in households’ ability to afford costs. And reflects the effect of government policies in limiting price increases.
The truncated average mitigates the impact of irregular changes
To provide a more accurate picture of core inflation, some temporary changes have been removed from the CPI calculations. These include large declines in electricity and auto fuel prices. Under this adjustment, the average annual truncated inflation rate was 3.2% in the first quarter of December 2024. Down from 3.6% in the third quarter of the same year. This rate reflects the trend towards stabilization of inflation in the categories most impacting households.
Goods and Services Inflation: The Clear Differences
While goods prices have fallen significantly, services inflation has remained high. Annual goods inflation fell to 0.8%, compared to 1.4% in the previous quarter. This decline was driven by lower electricity and auto fuel prices as well as lower new home prices. On the other hand, annual service inflation was 4.3%, indicating continued increases in rents, medical services, and insurance prices. This increase reflects the difficulties that some sectors are facing in keeping up with economic changes.
Non-Discretionary Inflation: A Significant Decrease
Non-discretionary inflation, which includes basic goods and services such as food, fuel, housing costs, and health care. Has seen a significant decline. The inflation rate in this sector was 1.8% in the last quarter of 2024, the lowest since 2021.
Energy Bill Relief Fund Rebates
A major factor that helped reduce inflation was the implementation of rebates from the Commonwealth Energy Bill Relief Fund (EBRF). The Australian government began offering these rebates from July 2024, and they had a significant impact on reducing electricity prices. In the last quarter of 2024, electricity prices fell by 9.9%, and they saw a 25.2% decrease over the full year. This decline helped reduce the financial burden on households, as households received the second instalment of the rebate in the last quarter of 2024.
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