Steaks and petrol push up consumer prices but COVID weighs on economy

Consumer prices rose by a much lower-than-expected 0.6 per cent in the March quarter, as higher priced petrol and steak were offset by weakness in COVID-affected industries and generous government stimulus programs.

The Australian Bureau of Statistics on Wednesday reported annual inflation reached 1.1 per cent over the past 12 months. It is the highest level since the advent of the pandemic but still points to ongoing weakness in the economy.

Beef and veal prices jumped 3.7 per cent in the March quarter as farmers started to re-build their drought-affected herds.Credit:Bloomberg

Key measures of underlying inflation also remained subdued. The trimmed mean rose by 0.3 per cent to be 1.1 per cent up over the year while the weighted median lifted by 0.4 per cent to be 1.3 per cent higher over the the past 12 months.

All measures of inflation are still well short of the Reserve Bank’s 2 to 3 per cent target band. The bank has said it will not start lifting interest rates until inflation is sustainably within its target band, a position not expected until 2023 or 2024.

The ABS found beef and veal prices increased by 3.7 per cent over the March quarter, with farmers starting to re-build their herds in the wake of recent drought.

But prices for fruit, down 1.6 per cent, and other cereals, down 2.7 per cent, fell due to the good season of the past six month.

Petrol prices jumped by 8.7 per cent as the global price of oil recovered from the lows it experienced during the pandemic. Prices lifted by 1.7 per cent in January, by 2.7 per ent in February and then by 7 per cent through March.

Despite the sharp increase in the quarter, petrol prices are up by a much more modest 0.4 per cent over the past year.

Motor vehicle prices have also started to rise, lifting by 5.7 per cent over the quarter.