Consumer prices surge 1.6 per cent over September quarter as free childcare policy ends

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Consumer prices have risen by 1.6 per cent from the June quarter to the September quarter, driven by the end of temporary free childcare and higher petrol prices.

The Australian Bureau of Statistics said the Consumer Price Index rose 0.7 per cent over the year to the end of September.

Over the June quarter, prices went backwards, known as deflation, with the CPI slumping by 1.9 per cent after the Federal Government temporarily made childcare free to help families survive the economic fallout from the coronavirus pandemic.

It was the biggest quarterly fall in the 72-year history of the index as childcare prices dropped by 95 per cent.

Childcare was the most significant price rise in the CPI from June to September, rising by 0.9 per cent after free childcare ended on July 13.

Over the quarter, food prices dropped by 0.4 per cent, alcohol and tobacco prices rose 1.6 per cent and transport prices jumped by 3.4 per cent as the cost of petrol and cars increased.

ABS Head of Prices Statistics Andrew Tomadini said without the rise in childcare, the CPI would have increased by 0.7 per cent.

“Significant rises were also recorded in the September quarter for automotive fuel (9.4 per cent) following a rebound in world oil prices, and pre-school and primary education (11.1 per cent), with before-and-after school care no longer being free,” he said.

Mr Tomadini said strong demand and supply shortages led to price rises and less discounting for many products, such as furniture and household appliances.

The measures of underlying inflation, which strip out volatile items and are closely watched by the Reserve Bank, were more subdued.

The trimmed mean rose 0.4 and the weighted median rose 0.3 per cent.

Economists surveyed by Reuters predicted that consumer prices would jump by 1.5 per cent from the June to September quarter.

They forecast that annual inflation would rise by 0.7 per cent.

Inflation is well below the Reserve Bank’s target range of 2 to 3 per cent, amid the first recession in Australia in nearly 30 years, compounded by the economic shutdowns and government lockdowns to stop the spread of COVID-19.

Many economists expect the Reserve Bank next week to cut interest rates by 0.15 per cent to a new record low of 0.1 per cent to help the battered economy.

By business reporters Sue Lannin and Rachel Pupazzoni (Original ABC Article)