If you’ve ever wondered about the CPI figures released by the Australian Bureau of Statistics (ABS), you’re not alone. So what exactly is the Consumer Price Index, and how does it work?

Let’s dive into household inflation, price changes and economic indicators that can impact your rental experience.

Understanding the Consumer Price Index: A household inflation gauge

The Consumer Price Index (CPI) is like a financial thermometer measuring household inflation in Australia.

Think of it as a giant shopping basket filled with various goods and services that everyday consumers like you and I buy.

It includes everything from groceries and utilities to transportation and medical expenses.

In short, the CPI is Australia’s most widely-used economic indicator, and the ABS releases a quarterly and monthly update.

This article includes the figures for the December Quarter 2023 update.

Why does the Consumer Price Index matter for renters?

As a renter, the CPI is more than just numbers; it significantly impacts your financial wellbeing and budgeting decisions. Here’s why it matters:

1️⃣ Rental costs: Rent is one of the most significant expenses renters have, and the CPI can influence how it changes over time. When the CPI rises, it indicates inflation, which may lead to higher rent prices.

2️⃣ Housing affordability: Changes in the CPI can impact housing affordability. As household expenses increase, renters may find it more challenging to set aside savings for a future home deposit.

3️⃣ Cost of living: The CPI gives us insights into the overall cost of living. It helps renters understand the impact of inflation on everyday expenses like groceries, utilities and transportation.

4️⃣ Wage adjustments: Employers and the government may use the CPI to adjust wages and benefits to account for the changes to the cost of living.

The CPI and the rental market

For renters, the CPI plays a critical role in understanding rental trends.

When the CPI increases, landlords may adjust rent prices to keep up with rising costs. However, the CPI can also guide renters in negotiating fair rental increases or seeking more affordable housing options.

As a renter, staying informed about the CPI and its fluctuations can empower you to make informed financial decisions. While a moderate increase might not drastically impact your budget, it’s worth keeping an eye on long-term trends.

Understanding the CPI can also help you plan for potential rent increases or evaluate your housing options in different climates.

Remember, while the CPI is an essential indicator, other factors also influence the Australian rental market, such as local supply and demand and government policies.

📈 The December Quarter 2023 Update 🗓️

  • CPI rose 0.6% this quarter.
  • CPI rose 4.1% over 12 months to December 2023 quarter.
  • Significant price increases in domestic holiday travel and accommodation (+3.9%), Medical and hospital services (+1.2%), and new dwelling purchases by owner-occupiers (+1.5%).

Monthly inflation data can be found here.

Capital city highlights:

Sydney (+0.4%)
  • Rents (+1.3%).
  • Electricity (-3.2%).
  • New dwelling purchase by owner-occupiers (+1.1%)

Sydney recorded an annual rise of 4.2%.

Melbourne (+0.6%)
  • Domestic holiday travel and accomodation (+3.7%).
  • Electricity (-2.0%).
  • New dwelling purchase by owner-occupiers (+1.4%).

Melbourne recorded an annual rise of 3.8%.

Brisbane (+0.5%)
  • Domestic holiday travel and accommodation (+3.0%).
  • Insurance (+4.9%).
  • Major household appliances. The Queensland government’s Climate Smart Energy Savers initiative offered up $1000 cash back on a range of appliances with energy-efficiency ratings of 4 stars or better. (-10.3%)

Brisbane recorded an annual rise of 4.2%. 

Perth (+1.5%)
  • Electricity . The rise was due to the unwinding of the first instalment of the Energy Bill Relief Fund rebates introduced from July 2023, partially offset by the introduction of the second instalment for all households from December 2023. (+56.7%)
  • New dwelling purchase by owner occupiers (+5.6%).

Perth recorded an annual rise of 3.6%.

Adelaide (+0.7%)
  • Domestic holiday travel and accommodation (+8.3%).
  • New dwelling purchase by owner occupiers (+1.4%).
  • Electricity (-2.4%).

Adelaide recorded an annual rise of 4.8%, the most significant rise of all capital cities.

Hobart (+0.7%)
  • Electricity (+7.3%) due to the unwinding of the Energy Bill Relief Fund rebate for concession households.
  • New dwelling purchase by owner occupiers (+2.1%).
  • Rents (-2.5%). 

Hobart recorded an annual rise of 3.3%.

Darwin (+0.5%)
  • Sports participation (+13.5%). The rise was due to the unwinding of the Sport Voucher Scheme for school age children.
  • Electricity (-6.5%).

Darwin recorded an annual rise of 3.9%.

Canberra (+0.4%)
  • New dwelling purchase by owner occupiers (+2.6%).
  • Automotive fuel (+1.5%).

Canberra recorded an annual rise of 3.7%.

Strongest annual growth in insurance premiums since 2001

Insurance prices rose 16.2 per cent in the 12 months to the December 2023 quarter, which is the strongest annual rise since March 2001. Higher reinsurance, natural disaster and claims costs contributed to higher premiums for house, home contents and motor vehicle insurance.

New dwellings annual price growth steady at 5 per cent

Annual growth in new dwelling prices remained steady at 5.1 per cent in the December 2023 quarter, however, is significantly down from the peak of 20.7 per cent in September 2022. The moderation in annual price growth over the past 12 months reflects subdued new demand and building materials cost increases easing.

Rental price growth remains above 7 per cent over the past 12 months

Rental prices rose 7.3 per cent annually, slightly lower than the 7.6 per cent annual rise in the September 2023 quarter. Continued growth in rental prices reflects low vacancy rates and a tight rental market. 

The next release will be for the March Quarter on 24 April 2024.

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