Australian annual consumer price index inflation rises to 3.8 percent in June quarter

Australia inflation triples in just three months as a lack of international backpackers drives up fruit prices – and sparks fears of early interest rate hikes

  • Annual inflation reached 3.8 percent in June – three times the March level of 1.1 percent
  • Consumer price index rose at fastest pace since September 2008
  • In three months, fruit prices rose by 4.7 percent, vegetable prices by 5.5 percent










Inflation in Australia tripled in just three months as a lack of overseas backpackers pushed up fruit prices.

The annual consumer price index rose to a 13-year high of 3.8 percent in the June quarter, up from 1.1 percent in the March quarter.

The pandemic closure of the Australian border to foreigners is now starting to bite, with farmers no longer able to rely on an army of overseas backpackers during harvest season.

Fruit prices rose 4.7 percent in the three months to June 30, while vegetable prices rose 5.5 percent in the same period.

Both increased due to a shortage of pickers, extreme rainfall on Australia’s east coast and Cyclone Niran affecting banana crop yields, the Australian Bureau of Statistics said.

Inflation in Australia tripled in just three months as a lack of overseas backpackers (pictured is stock photo) pushed up fruit prices. The annual consumer price index rose to a 13-year high of 3.8 percent in the June quarter — up from 1.1 percent in the March quarter

The closure of the Australian border to foreigners is now starting to bite as farmers can no longer rely on an army of overseas backpackers during harvest season.  Fruit prices rose 4.7 percent in the three months to June 30, while vegetable prices rose 5.5 percent over the same period (pictured is a greengrocer customer in Lakemba in Sydney's southwest)

The closure of the Australian border to foreigners is now starting to bite as farmers can no longer rely on an army of overseas backpackers during harvest season. Fruit prices rose 4.7 percent in the three months to June 30, while vegetable prices rose 5.5 percent over the same period (pictured is a greengrocer customer in Lakemba in Sydney’s southwest)

The Reserve Bank of Australia has repeatedly promised to keep the cash interest rate at a record low of 0.1 percent until 2024, but surprisingly high inflation could get its hands on it.

Overall inflation, calculated by the Australian Bureau of Statistics, has risen above the two to three percent mark of the RBA for the first time in a decade.

Cryptocurrency investors are particularly concerned about what higher inflation in Australia will mean for purchasing power, with 79 percent of 1,010 enthusiasts surveyed by cryptocurrency trading platform Gemini Trust predicting this will be a problem over the next five years.

Jeremy Ng, Gemini’s Singapore-based Asia-Pacific managing director, said Bitcoin, limited to 21 million units, has been particularly attractive to investors as governments around the world have put in place Covid incentives.

“As a limited supply asset, high-growth cryptocurrencies like Bitcoin can be a strong inflation hedge against devaluation of fiat currencies,” he said.

“For this reason, we see that many investors have crypto like Bitcoin, instead of using it as a means of payment.”

The Reserve Bank of Australia has repeatedly promised to keep the cash interest rate at a record low of 0.1 percent until 2024, but surprisingly high inflation could get its hands on it.

The Reserve Bank of Australia has repeatedly promised to keep the cash interest rate at a record low of 0.1 percent until 2024, but surprisingly high inflation could get its hands on it.

While Sydney will be in lockdown for at least the next four weeks, the rest of the world will open up, signaling a rise in crude oil prices and a 6.5 percent increase in gasoline prices in the June quarter.

CommSec chief economist Craig James said that while the peak in headline inflation is unlikely to force an early rate hike in 2021 or 2022, the Reserve Bank of Australia would now likely consider a hike in the June 2023 quarter.

“As the lockdown in Sydney enters its fifth week and is unlikely to end anytime soon, now is not the time for detailed deliberations on monetary policy institutions,” he said.

EY chief economist Jo Masters said a continuation of the lockdown in Sydney until August 28 would shrink the economy in the September quarter and ease inflationary pressures.

Cryptocurrency investors (pictured are Bitcoins) are particularly concerned about what higher inflation in Australia will mean for purchasing power, with 79 percent of 1,010 enthusiasts polled by cryptocurrency trading platform Gemini Trust predict it will be a problem in the next five years.

Cryptocurrency investors (pictured are Bitcoins) are particularly concerned about what higher inflation in Australia will mean for purchasing power, with 79 percent of 1,010 enthusiasts polled by cryptocurrency trading platform Gemini Trust predict it will be a problem in the next five years.

“The economy is now expected to contract in the September quarter, with a significant blow to activity in New South Wales as a result of the lockdown, which has been extended today until the end of August,” she said.

“If economic activity is held back, so will inflationary pressures and the pursuit of full employment.”

The Westpac Bank expects real estate prices in Sydney to rise by 22 percent in 2021, followed by 4 percent next year.

Melbourne home values ​​are expected to rise 16 percent this year, followed by a further 6 percent in 2022.

But Westpac predicted that median property prices in both Sydney and Melbourne would fall 6 percent by 2023.

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