Australian inflation would be next to nothing without the government's influence

Australian consumer price inflation (CPI) increased by 2.1% in the year to June, up from 1.9% in the 12 months to March.

Over half of that increase came from just three areas — cigarettes, petrol and utility charges.

Including other items such as beer, the cost to build new dwellings and medical expenses, it made up the vast majority of the entire increase over the year.

Macquarie Bank

Clearly, a large proportion of those increases were driven by government-legislated price increases.

According to Macquarie Bank, inflation for government-administered items — including tobacco — jumped by 6% over the year, nearly three-times faster than the headline increase.

In contrast, excluding tobacco and volatile price movements, inflation for goods and services with largely market-determined prices — supply and demand essentially — grew by just 0.5% over the same period.

It’s clear to see where inflationary pressures are coming from at present.

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