Many of us have been feeling the pinch of the rising costs of living, with the prices of basic commodities reaching all-time high prices.

And while many of us are hoping for some relief, it seems like those who are dealing with a tight budget will have to face further financial instability.

The Australian Bureau of Statistics (ABS) has reported that the cost of living crisis in the country has hit a new high, with inflation surging to 7.8 per cent in the December quarter of 2022. .

The ABS claimed that the figure marks the fastest annual pace of inflation since the March quarter of 1990 and well above the Reserve Bank of Australia’s (RBA) 2 to 3 per cent target.

ABS researchers also said that the new benchmark might prompt the RBA to raise the interest rate again in the upcoming weeks in order to avoid any further rising inflation.

ABS reported that the recent consumer price index hit an all-time high mark since 1990. Credit: Pexels/Monstera.

Given that the CPI increased by 7.3 per cent in the September quarter, the ABS' consumer price index (CPI) estimate for the December quarter was marginally less severe than the Reserve Bank's prediction of 8 per cent.

Treasurer Jim Chalmers has described this number as 'unacceptably high' since it is proof that Australians are still struggling with the cost of living.

The inflation spike was primarily fuelled by rising transport and housing costs. We can thank the reopening of state and territory borders and freedom to travel domestically to bolster a 13.3 per cent rise in holiday costs.

Meanwhile, petrol increased 13.2 per cent after the Ukraine invasion pushed up crude oil prices in the early part of 2022.

Flooding on the East Coast in early 2022 affected the supplies of fruits and vegetables, leading to an overall increase of 8.5 per cent.

The ABS report also detailed the price increases for the goods we need to buy every week. Dairy products had the biggest annual increase (14.9 per cent), followed by bread and cereal (12.2 per cent), and electricity (8.6 per cent).

Despite outcries of the current level being 'unreasonable', the treasurer said he believes inflation may have reached its peak

Chalmers said: 'This is very high inflation by historical standards, there's no use pretending otherwise, it's unacceptably high.'

'This is likely the peak in inflation but we won't know that for sure until we get the numbers for this March quarter that we're in now.'

'Inflation was the defining challenge in our economy in 2022 and it will be a defining challenge in our economy in 2023.'

In support of Chalmers' claim, AMP senior economist Diana Mousina, said that the rate increase in February was probably the last in the current cycle of tightening monetary policy, adding that inflation was projected to start to decline in 2023.

'The inflation backdrop looks much better at the start of 2023 compared to last year and many inflation indicators are pointing down which should mean that we are very close to the end of the tightening cycle and that the February rate rise should be the last one for this year,' she explained.

Meanwhile, Catherine Birch, Australia and New Zealand (ANZ) Banking Group Limited Senior Economist, predicted that the RBA will hike interest rates in February and March, bringing the cash rate to 3.6 per cent.

However, while inflation is anticipated to reduce from this point, economists predicted that it will continue to exceed the Reserve Bank of Australia's goal range of 2 to 3 per cent until 2025.

Additionally, the underlying measures of inflation, which exclude volatile price changes, were likewise high, with the trimmed mean increasing by 6.9 per cent over the last year.

Key Takeaways

• Inflation has hit a 32-year high of 7.8 per cent, making another interest rate rise almost a certainty.
• Holiday, petrol and housing costs were the main contributors to the inflation rate.
• Home borrowers have already gone through eight consecutive monthly rate rises.
• Economists and the Reserve Bank are expecting inflation to moderate from here but remain above the RBA's 2 to 3 per cent target until 2025.

We know the cost of living crisis is real and affects those with fixed incomes more than most, so let's all hope inflation continues to sit within the RBA's target and that there won't be any further rate hikes.

We understand these pesky living expenses can really put a dent in your budget, so make sure you stay up to date with the latest money-saving tips and take advantage of the daily deals and discounts that we share here at the SDC!

What are your thoughts on this? Share them with us in the comments below!

 

[Macarj]

I don't know what the problem is we built our new home in 1994 the interest rate on or loan was 10% within 2 years our interest rate was 17.5%

 

[JedCorella]

I don't know what the problem is we built our new home in 1994 the interest rate on or loan was 10% within 2 years our interest rate was 17.5%

I remember that. It nearly crippled me. Having said that what was the size of your mortgage at that time? Mine certainly was not half a million plus. A good proportion of loans these days are huge compared to the ones taken out 20-30 years ago. We are going to see a lot of people get into big financial trouble this year. This will lead to all sorts of social issues as people lose their homes, the stress on the relationship is huge leading to divorce, suicide, poor kids being shuffled between divorced couples and a lot of issues relating to these situations.

 

[mylittletibbies]

I don't know what the problem is we built our new home in 1994 the interest rate on or loan was 10% within 2 years our interest rate was 17.5%

I also remember these times, the young ones say "houses were much cheaper then" and so they were, but wages were also so much lower.
The problem with a large number of young couples starting out today are not happy to start off with the 3x1 home and want to start off where their parents have worked years to get to.
They must have the 4x2, theatre room, upmarket kitchen, flash bathrooms, walk in robes, ducted a/c, swimming pool. Don't forget the 4 wheel drive for mum to pick up the school kids in. And they then wonder why they can't manage.

 

[Ricci]

Now I'd be the first person to put my hand up and say that I sure don't understand the fancy maths they do to come up with the inflation figures. I can only go on how it affects me and mine and compare my historical data with today's. Last year about this time my shopping could be done for about $60, this year a similar basket costs about $100. That's one hell of a lot more than a 7.8% increase and doesn't take into consideration my fuel and power bills. To arrive at an amount of 7.8% something that doesn't affect me or mine must have dropped one hell of a lot to keep the figure so low. Even in the above article everything mentioned went up by more than the 7.8% so how does that compute?

 

[JedCorella]

I also remember these times, the young ones say "houses were much cheaper then" and so they were, but wages were also so much lower.
The problem with a large number of young couples starting out today are not happy to start off with the 3x1 home and want to start off where their parents have worked years to get to.
They must have the 4x2, theatre room, upmarket kitchen, flash bathrooms, walk in robes, ducted a/c, swimming pool. Don't forget the 4 wheel drive for mum to pick up the school kids in. And they then wonder why they can't manage.

You are 100% right. A lot of young people live well beyond their means and it is destroying their lives when reality catches up with them.