CPI rose 0.9% in the December 2020 quarter

The Consumer Price Index (CPI) rose 0.9 per cent in the December 2020 quarter, according to the latest data from the Australian Bureau of Statistics (ABS).

Head of Prices Statistics at the ABS, Michelle Marquardt said: "The December quarter CPI was primarily impacted by an increase in tobacco excise and the introduction, continuation and conclusion of a number of government schemes, including childcare fee subsidies and home building grants."

The most significant price rises in the December quarter were tobacco (+10.9 per cent), following the 12.5 per cent increase in the tobacco excise tax, and child care (+37.7 per cent), after the unwinding of free child care, with out-of-pocket expenses now returning to pre-COVID levels.

Other price rises in the December quarter were domestic holiday travel (+6.3%), with state and territory borders re-opening in the lead up to the Christmas period, and medical and hospital services (+2.5 per cent), after private health premiums increased on 1 October following a six-month freeze.

Prices rose in the purchase of new dwellings (0.7 per cent) following increased demand. Ms Marquardt said: "The rise in demand for new dwellings is reflected in higher building approvals for houses and a record value for housing loan commitments in November. The December quarter rise of 0.7 per cent in the purchase price of new dwellings would have been higher, but was partially offset by the Federal government's $25,000 HomeBuilder grant, and similar $20,000 grants by the Western Australian (WA) and Tasmanian state governments."

The most significant price fall was in electricity (-7.5 per cent) after the WA Household Electricity Credit provided households with a one-off $600 credit, resulting in a fall in electricity prices of 66.7 per cent in Perth.

For more details on the impact of COVID-19 and government schemes on the CPI, see Update to measuring the CPI in the December 2020 quarter.

Annual inflation for the December 2020 quarter was 0.9 per cent. Ms Marquardt said: "Annual inflation increased to 0.9 per cent following a rise of 0.7 per cent in the September quarter. Since the June quarter fall of 0.3 per cent, the increase in annual inflation largely reflects the unwinding of free child care and higher petrol prices. These impacts are largely removed from measures of underlying inflation, with the trimmed mean measure remaining at a record low of 1.2 per cent."

This issue includes the introduction of updated weighting patterns. For more details see The 2020 annual re-weight of the CPI. The ABS has also published two additional pieces with the December quarter CPI release: 'CPI exclusion-based measures' and 'Underlying inflation measures’.