Runaway inflation is pushing everyday goods out of reach for some Aussies

A cartoon businessman inflates a giant green balloon with a white money sign on it

Worldwide crises have flung Australian supply-chains into chaos, pushing economic inflation to its highest rate since 1991.

Rather than absorb the price changes or boost wages, many Australian corporations have chosen to compensate by foisting profit-protecting hikes onto consumers instead. As a result, everyday prices on non-discretionary items like food and fuel are skyrocketing, while average Australian incomes have only seen a dismal 0.7% growth.

These changes contribute significantly to the rising cost of living, which impacts low-income households the hardest. 

So which items have become pricier due to inflation? And how can we adjust our financial habits to cope? Let’s unpack.

Groceries

A hand holds a cartoon jar of fruits and veggies

Major Australian supermarket chains like Coles, Woolworths, and IGA have all made similar announcements warning of price hikes in recent months. These are primarily due to rising supply-chain costs, disruptions due to floods, and workers having to isolate themselves.

Specifically, food producers have warned of price increases to the following:

  • Dairy products, like milk and cheese (10-20% increase).
  • Canned goods, like baked beans and tinned spaghetti (10-20% increase).
  • Wheat, rice, fats, and oil (5-20% increase). This also includes ancillary products like biscuits, bread, and beer.
  • Fresh fruits and vegetables (10% increase), specifically bananas, tomatoes, zucchinis, beans, cucumbers, avocados, and mangoes.
  • Red meat (5-50% increase) like beef and lamb.

Generally speaking, the further away food has to be grown or transported, the higher the cost to the shopper. To offset these rising costs and support small businesses (who often can’t absorb price changes the way big supermarkets can), buy local wherever possible and shop for fruits and veggies that are in season.

(Hot tip: vegetables like broccoli, cauliflower, and lettuce are grown locally in Australia all year round, so they tend to stay pretty cheap).

It usually takes one to two months for price changes to come through, so luckily there is a delay between production cost jumps and bigger stickers on shelves. This gives you a chance to rethink your budget and strategise ways to keep food affordable, like buying groceries online or subscribing to a meal kit delivery service instead.

Petrol

Petrol prices are pretty dire at the moment. The industry has been rocked by an 8-year high due in large part to Russia’s invasion of Ukraine. 

The latest report from the Australian Competition & Consumer Commission (ACCC) revealed that prices in capital cities surpassed 182.4 cents per litre (cpl) in late February. This past week alone has seen panic-inducing surges to as much as 221.4 cpl.

This doesn’t just affect car-owners, either: trucking and delivery companies have been forced to pass  the price burden onto retailers (hence rising supermarket supply costs). 

“Our profit margin in the trucking industry is typically 2 to 3 per cent,” says South Australian Road Transport Association chief executive Steve Shearer. “But the increase in fuel prices have seen our overall costs rise by about 8 per cent.”

This means fuel prices have flown past anything truckers could hope to absorb. “Any truck operator who doesn’t pass on the fuel price increases in full will be broke within three months.”

In the meantime, consumers can cut transport costs by rethinking their work commutes or trying these petrol-saving tips.

Housing costs

A scared piggy bank caught between rising coins and a cartoon house

Real estate prices have climbed to mind-numbing heights over the past year, but this has been mostly driven by demand – resulting in demand pull inflation. Rising rent and construction is cost push inflation. Both are the result of to much cheap liquidity in the system. 

Timber and steel prices lifted construction costs by 4.2%, thanks primarily to supply chain issues (that old chestnut) and a local construction boom.

While the Consumer Price Index for rent only recorded a market-share jump of 0.1% in the December quarter, this number likely hasn’t caught up with reality. In the months following that ABS data release, Corelogic recorded that rents bounced 3% in January alone. The reopening of international borders will only push that number up in the near future.

Homeowners can at least access credit to afford their accommodation: as CoreLogic’s research head Tim Lawless points out, renters face a pretty firm price ceiling. “They will start to form larger households or look for cheaper rental accommodation around the inner-city markets, or some of the outer fringe markets which are more affordable.”

RELATED: 4 ways to save money on your rent

Feeling the rising cost of living? Head over to the family finances hub for more economising tips.