The cost of new homes also rose 3.3%.
âThe costs of construction inputs, such as lumber, have increased due to supply disruptions and shortages,â said Michelle Marquardt, head of price statistics at ABS. “Combined with high levels of construction activity, this has seen the price increases passed on to consumers.”
Fortunately, the price of food has only increased by 1.3% and fruits are cheaper (down 8.3%). It’s also cheaper to buy clothes (down 5.5%) as struggling retailers try to sell excess inventory.
The annual rise in the CPI is due to a change in household spending patterns during closings, said Reserve Bank of Australia Governor Philip Lowe.
âRather than taking a trip, going to the gym or eating out, people were buying goods for their homes, including setting up home offices and purchasing home exercise equipment.
âThe result has been an unprecedented shift in consumption patterns, which reverberated throughout the global economy,â Lowe said.
However, Matt Grudnoff, senior economist at the Australia Institute, expects supply chain problems to disappear next year, reducing overall inflationary pressures.
âThe pricing pressures are temporary and the idea that we’ll have bottlenecks in the supply chain is unlikely,â he says.
âThe best case scenario is that we return to pre-pandemic conditions, which saw eight years of wage stagnation,â he said.
Yet fears are growing that the RBA will need to raise official interest rates to curb rising inflation. If bank interest rates rise to match increases, it could lead to mortgage stress for many homeowners with high debt.
“There are a lot of people coming in [property] market now when interest rates are very low which would struggle if rates increased in the future, âsaid Grudnoff.
The regular financier has already stepped in to force banks to demonstrate that new borrowers are able to make higher mortgage payments if interest rates rise.
According to the Australian Prudential and Regulatory Authority, more than one in five new home loans approved in the June quarter was more than six times the income of borrowers, showing that medium-term risks to financial stability are mounting.
Gross agrees that some mortgage stress is likely, but points out that the RBA is reluctant to raise interest rates as wage growth remains weak. He also expects the housing market boom to ease.
“At the end of the day, if wages don’t go up and borrowing capacity remains limited, you’re going to run out of people willing to pay $ 1 million for a house, which will eventually force real estate prices up.” He said.