Western Australia's impact on the Australian economy is becoming clearer, with new Consumer Price Index figures showing Perth's inflation leads other capitals, running well ahead of other city averages and pulling up the national CPI.
Western Australia's impact on the Australian economy is becoming clearer, with new Consumer Price Index figures showing Perth's inflation leads other capitals, running well ahead of other city averages and pulling up the national CPI.
Houses prices and food were the core items pushing inflation across the nation, though in most state capitals the CPI was negative for the December quarter, while Perth's grew 0.4 per cent to hit an annualised rate of 4.4 per cent for the year ending December 31.
Only the Northern Territory capital Darwin had a higher CPI for the year and, along with Perth, was the only other city recorded as having a positive CPI growth. However, Darwin's size makes it unlikely to have significantly impacted on the national result.
Overall the nation's CPI was 3.3 per cent for the year, down 0.1 during the past quarter. Nationally food was up 8.6 per cent and housing was up 3.2 per cent.
The figures prompted state Liberal Troy Buswell to draw a link between the state government's handling of land releases, a key factor in huge housing price rises in the past year, and its impact on national inflation.
"The Carpenter Government's housing crisis is hitting home buyers by with a double wammy because higher prices are putting pressure on interest rates" Mr Buswell said.
However an economic report released today by Western Australia's Department of Treasury and Finance pointed the finger at a higher than average recreation spend - caused by WA holiday makers.
According to the report, recreation contributed 0.31 percentage points to Perth's 0.4 per cent increase, driven mainly by domestic holiday travel and accommodation.
A table released by the ABS is pasted below, followed by the Treasury report, and then the announcement from Mr Buswell's office:
City | Dec Qtr | Annual |
Sydney | -0.2% | 3.2% |
Melbourne | -0.1% | 2.9% |
Brisbane | -0.1% | 3.4% |
Adelaide | -0.3% | 3% |
Perth | 0.4% | 4.4% |
Hobart | -0.3% | 2.5% |
Darwin | 0.5% | 5% |
Canberra | -0.3% | 3.1% |
The full text of the treasury report is pasted below
The Consumer Price Index for Perth increased by 0.4% in the December quarter 2006, after rising 1.1% in the September quarter. Consumer price growth remained above the national average rate of growth for the eleventh consecutive quarter.
The main contributors to the 0.4% growth in prices in Perth during the December quarter were:
- Recreation (contributing 0.31 percentage points - of the 0.4% increase), driven by rises in the price of holiday travel and accommodation (0.31 percentage points) and in particular domestic holiday travel and accommodation (0.22 percentage points);
- Housing (0.15 percentage points), in particular from house purchases (0.08 percentage points). The contribution to CPI growth from house purchases has fallen from its recent high levels for Perth (0.29 percentage points in the September quarter), but was still higher than its relative contribution nationally (0.04 percentage points);
- Household contents and services (0.12 percentage points) mainly due to price rises in furniture and furnishings (0.09 percentage points).
While these three categories alone contributed 0.58 percentage points over the quarter, a fall in the transportation category (which detracted 0.43 percentage points and was driven by a decline in automotive fuel) was the major component to offset these price rises.
In annual terms, Perth's CPI increased by 4.4% in year ended terms over 2006, up from 4.0% over 2005.
Nationally, consumer prices fell by 0.1% in the December quarter, following an increase of 0.9% in the September quarter. The main contributor to the fall was transportation (detracting 0.51 percentage points), while recreation (0.15 percentage points) and housing (0.10 percentage points) offset some of the fall.
While national CPI growth moderated to 3.3% over 2006 (higher than the Reserve Bank of Australia's target range for inflation of 2 3%), the RBA's December quarter measure of CPI excluding volatile items3 shows CPI growth across the nation was 2.7% over 2006.
Another measure of underlying price pressures, the Reserve Bank's trimmed mean measure of inflation4, (which also removes the impact of volatile items), increased by 2.9% over 2006.
The announcement from Mr Buswell is pasted below
WA has the highest rate of inflation of any Australian state, and was the only state to record an increase in the December quarter according to figures today.
Shadow Treasurer Troy Buswell said figures showed that over the 12 months to December 2006, prices in Perth as measured by CPI increased by 4.4 per cent - a rate of inflation 33 per cent higher than the average for other Australian capitals.
The figures showed that WA's rate of inflation was 38 per cent higher than Sydney's and 52 per cent higher than Melbourne's.
According the ABS, higher than average housing prices in Perth were responsible for driving up inflation.
"The Carpenter Government's housing crisis is hitting home buyers by with a double wammy because higher prices are putting pressure on interest rates" Mr Buswell said.
"Thanks to Eric Ripper's aggressive stamp duty regime and Alannah MacTiernan's land supply crisis, families not only have to deal with record house prices, but they are now also feeling the pinch from property-drive inflation."
Mr Buswell said the Carpenter Government needed to take responsibility for the inflation result and urgently address the housing affordability crisis before it added further fuel to the interest rates fire.
"This has heightened pressure on the State Government to do something about the Housing Crisis it has created and that is crippling Western Australians," he said.
"The State Government must address the issues associated with land supply and an overly aggressive state tax regime which is having disastrous impacts on young families looking to enter the housing market for the first time.
"Eric Ripper is always quick to seize on any economic good news generated by WA's booming economy, but he needs to realise he also has a responsibility to help Western Australian families.
"The State Government has the means and capacity to help Western Australians by offering tax relief, especially in the area of property taxes like stamp duty.
"The fact that Eric Ripper chooses to take no action while booming property prices and rising inflation bite into the financial stability of Western Australians is incredibly disappointing.
"Every Western Australian has a right to demand answers and action from Eric Ripper to help ease the burden, but sadly nothing is forthcoming."