27/01/2021 - 10:00

Prices are down from power bill credit

27/01/2021 - 10:00

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Prices in Perth deflated 1 per cent in the December quarter, thanks to the government’s electricity credit, but there’s an underlying upward pressure.

Prices are down from power bill credit
Excluding the government's power bill credit shows a different picture. Photo: Gabriel Oliveira

Prices in Perth deflated 1 per cent in the December quarter, thanks to the government’s electricity credit, but there’s an underlying upward pressure.

There have only been four quarters in the past decade which recorded a price fall in Perth, according to the Australian Bureau of Statistics’ Consumer Price Index.

Electricity prices for consumers fell 66.7 per cent in the quarter because of a once-off $600 power bill credit delivered by the state government through Synergy.

Perth was the only capital city in which prices fell.

But excluding the electricity credit, the ABS said Perth CPI was up 0.9 per cent for December.

That follows a 1.8 per cent rise in the three months to September.

“New dwelling purchases by owner occupier (prices rose 2.2 per cent) due to strong demand for house construction driven by the combined value of $45,000 of housing grants available from the federal and Western Australian governments,” the ABS said.

Beer prices were up 3 per cent, and non-alcoholic beverages up 6.3 per cent, due to the introduction of the Containers for Change container deposit scheme, the bureau said.

Nationally, inflation was 0.9 per cent in the December quarter, and 0.9 per cent across the year.

Job website Indeed's Asia Pacific chief economist Callam Pickering said consumer prices had been volatile through COVID-19.

“The key takeaway though is that overall inflation remains low and is likely to remain that way over the next few years due to high levels of spare capacity,” Mr Pickering said.

“That said, inflation is likely to spike in 2021, as the impact of COVID-19 drops out. 

“However, the combination of high unemployment, low wage growth and a strong Australian dollar indicates that inflation will inevitably settle well below the RBA’s inflation target.”

Recently, the Reserve Bank of Australia warned asset prices may incease as much as 30 per cent for every 1 per cent permanent drop in the cash rate.

Those could include home purchases, while other assets may not be captured by the CPI data.

CommSec senior economist Ryan Felsman said NAB’s December 2020 business survey showed business conditions were at their highest level since December 2018.

“The monthly reading of labour costs rose at a 0.8 per cent quarterly rate in December after rising 0.2 per cent in November,” Mr Felsman said. 

“Capacity utilisation rose from 79.1 per cent to a 10-month high of 80.9 per cent (81.0 per cent is the long-term average).

“The proportion of firms reporting that they did not require credit rose from near 43 per cent to near 60 per cent.”

Capacity utilisation was near its long-term average, he said, and more broadly the numbers showed a pipeline of work was forming as the economy recovered.

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