Current at: 02 May 2008
The cost of living is increasing at a faster rate than in any period (except for the GST introduction) since the mid-nineties and most of this increase is being driven by life’s essentials such as rents, fuel, pharmaceuticals, and household energy needs.
The CPI reading for the March quarter of 2008 came in at 1.3 per cent and 4.2 per cent annually. Over the last 12 months rent increased by 7.1 per cent, petrol 18.9 per cent, food 5.7 per cent and health 4.6 per cent.
HIA’s Chief Executive - Policy, Mr Chris Lamont, said that cost pressures recorded in the CPI were being driven by ‘cost-push’ factors such as skills shortages, capacity constraints and raw material price hikes.
“Rents are now growing at a pace not seen since the late 1980’s, many areas of Australia are now seeing double digit percentage increases in rents. There is nothing sacred about an inflation target of 3 per cent. More investment in skills training, infrastructure and affordable accommodation is necessary, however, rate rises are putting the breaks on this investment and ironically adding to cost of living pressures,” said Chris Lamont.
Australia’s interest rates are now among the highest in the developed world. Recent rate hikes have and are slowing the economy and unfortunately adding to housing affordability problems.
“The Reserve Bank’s strategy of raising rates is missing the mark. Higher rates have no impact on many of the structural factors that are causing the inflation problem, rather, they hit those who can least afford it,” said Chris Lamont.
HIA contends that structural impediments such as shortages in labour supply, especially in skilled occupations, housing shortages, and infrastructure bottlenecks will only be resolved by targeted investment.