Cost of household basics rise at twice cost of inflation

Jessica Irvine
News Limited newspapers
October 22, 2012

THE costs of basic household necessities – electricity, petrol, vegetables and the like – have risen at more than twice the rate of inflation over the past decade.

Ahead of key inflation figures due on Wednesday, News Limited analysis of Bureau of Statistics data found water and sewerage rates were the biggest price pressure point, more than doubling (up by 111 per cent).

Overall, the cost of the average basket of consumer goods purchased by households increased by 31 per cent.

But many households experienced even steeper price rises. Households on the dole went backwards in real terms over the decade, as their benefits increased in line with inflation, but their household costs went up by an even greater 38 per cent.

Necessities make up a bigger slice of spending for lower income households and these items dominate a list of the top 10 price risers.

“A lot of those items that have come down in price tend to be those discretionary or once-in-a-blue-moon purchases, whereas the everyday purchases have gone up in price,” Westpac senior economist Matthew Hassan said.

The cost of vegetables – and other household basics – have risen at twice the rate of inflation over the past 10 years.

“You do have the big staples – electricity, rates and rents – that tend to impact the middle income or lower income groups that have had the more sustained increases.

“Sure, you can reduce the amount of electricity you use or amount of petrol you’re buying, but it’s harder to do. It’s a necessity rather than something you can put off.”

Mr Hassan said increased water and sewerage costs were due to on-passing of costs associated with “drought proofing” of water supplies, including the cost of building desalination plants in Melbourne and Sydney and connecting dam systems in southeast Queensland.

Costs for working households and aged pensioner households also increased faster than general inflation, up 36 per cent and 35 per cent respectively. However, these households still come out ahead, on average, given total wages growth of 54 per cent in the period.

The aged pension is linked to wages growth, not inflation.

A survey of 25 economists by Bloomberg found they expect Wednesday’s figures will show a pick-up in the annual rate of inflation from 1.2 per cent to 1.6 per cent in the September quarter. Almost all think this will be low enough to enable the Reserve Bank to cut interest rates on Melbourne Cup day.

Top ten price rises over the past decade

Water and sewerage 111%
Electricity 103%
Secondary education 95%
Tobacco 90%
Gas 86%
Medical and hospital 85%
Pre-school and primary education 78%
Property rates, charges 72%
Automotive fuel 68%
Vegetables 65%
Top ten price falls over the past decade

Audio, visual and computing equipment 80%
Sports and camping equipment 16%
Small electric household appliances 14%
Games, toys and hobbies 14%
Men’s shoes 13%
Glassware, tableware and utensils 12%
Cars 12%
Household textiles 12%
Baby and children’s clothes 11%
Major household appliances 11%