When energy prices soar locally and/or across the globe and many household essentials go up in price, cost-of-living becomes the topic on everyone’s lips. To help make sense of the current financial climate, it’s worth taking a look at the historical picture of Australia’s inflation.
Australia’s Inflation Rate – A Quick Look at 2022
At the end of October 2022, . While this is nowhere near the peaks inflation soared to in 1951 or the mid 1970s, it does represent a 32-year high and the fastest annual increase seen since 2001.
A Brief History of Australian Inflation
The Australian Bureau of Statistics began publishing a quarterly Consumer Price Index (CPI) in 1960 to share the Australian economy’s consumer price inflation. The CPI is the principal gauge of inflation used to set monetary policy by the Reserve Bank of Australia (RBA).
The history of Australia’s inflation, since the CPI was introduced, can be split into four key chapters. While the CPI began in 1960, it was backdated to late 1948, and the first phase consists of the post-war recovery period and the “Korean War boom.” Next was the disinflationary phase lasting from 1953 to 1972, followed by a chapter of high inflation stretching from 1973 to 1990. Finally comes the period following the RBA’s introduction of inflation targeting. Let’s take a closer look at each chapter in Australia’s inflation history.
Between 1950 and 1951 Australia saw its biggest recorded inflation jump in the CPI, with 23.9% annual CPI movement, attributed to the Korean War boom. While it couldn’t exactly be called stable, inflation during the disinflationary period didn’t again reach above 10%. In fact, the highest peak during that era was 7.6%, recorded in September ’56.
Australia’s economy in the 1970s was subject to the OPEC oil shocks, creating peaks as high as 17.7% annual CPI movement, recorded in 1974. This was part of a pattern of global economic upheaval caused by the price shock of global oil that began in 1973.
While inflation fell from the 1974 peak, it remained high throughout the rest of the ’70s and through the ’80s. But things changed drastically in the 1990s. Australia’s unemployment rate reached a record high of 11% during the 1991 recession, and it remained high for several years. The resulting decrease in domestic demand meant that year-end inflation dropped to just 0.3%, the lowest it had been for 30 years.
Inflation remained low, and relatively stable, for decades, with annual CPI movements staying below 5% for the majority of the period. This was mostly down to the RBA introducing a 2-3% medium-term target for inflation in 1993.
The Cost of Living in Australia – The Bigger Picture
While 2022 saw the highest rate of inflation in Australia since 1990, it’s worth remembering that it’s part of a wider global picture – and Australia’s situation is far from the most dire. The US’s annual inflation rate for 2022 came in considerably higher at 9.1% and the UK’s was higher still at 9.4%.
Things can seem bleak when inflation rises, but it’s important to remember that the peaks don’t tend to last. Nothing is certain, but in summer 2022, the RBA and the federal government forecast that inflation would reach its peak in the final quarter of 2022, before falling again in the following year, along with a real increase in salaries.
Of course, while we’re seeing high prices across the country, costs still vary greatly depending on whereabouts in Australia you are. For instance, you could buy a house in Hobart for half the price of one in Sydney!
While inflation and the cost of living are governed by forces beyond our control, there are some things you can do to counter the effect Australia’s cost of living has on you. Read “How Not to Let the Cost of Living Drive You Out of Australia” as well as our other articles that offer tips on more affordable living across the continent.
Plus, you can always rely on Western Union to help you move money safely and easily. Whether you want to send money from or to Australia, we’re here to make sure you always have a reliable and convenient way to send money to loved ones.