{"id":61236,"date":"2025-02-27T02:25:31","date_gmt":"2025-02-27T02:25:31","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=61236"},"modified":"2025-02-27T02:25:31","modified_gmt":"2025-02-27T02:25:31","slug":"why-australian-cpi-is-understated","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2025\/02\/27\/why-australian-cpi-is-understated\/","title":{"rendered":"Why Australian CPI is understated"},"content":{"rendered":"

CPI grew by 2.5% (Y\/Y) in January 2025 while the trimmed mean increased slightly to 2.8%, still comfortably within the RBA’s 3.0% target.<\/p>\n

\"Australian<\/p>\n

However, the Labor government has found a neat trick to make inflation appear lower while also boosting GDP growth figures.<\/p>\n

According to the ABS, electricity prices are falling. The CPI measure shows a 35% drop for the 12 months to October 2024, with prices still declining year-on-year despite a 22.0% increase in November and an 8.9% increase in January.<\/p>\n

\"Australian<\/p>\n

The chart below shows that actual prices (light blue) increased by 17% since June 2023, while the official figures (dark blue) show an 8.0% decline.<\/p>\n

\"Australian<\/p>\n

The difference is government electricity rebates, which are offset against actual electricity costs:<\/p>\n

a) Introduction of the 2023-24 Energy Bill Relief Fund (EBRF) rebates<\/p>\n

b) Introduction of the first instalment of 2024-25 Commonwealth rebates for all households in QLD and WA, and State rebates in QLD, WA and TAS<\/p>\n

c) Introduction of the first instalment of 2024-25 Commonwealth rebates for all households in NSW, VIC, SA, TAS, NT and ACT<\/p>\n

d) Introduction of the second instalment of 2024-25 Commonwealth rebates for all households in NSW, VIC, QLD, SA, TAS, NT and ACT<\/p>\n

e) Introduction of the second instalment of 2024-25 Commonwealth rebates and State rebate for all households in WA<\/p>\n

f) Introduction of the third instalment of 2024-25 Commonwealth rebates for all households in NSW, VIC, QLD, SA, TAS, NT and ACT<\/p>\n

Australians have been pushed into higher tax brackets by inflation and, rather than lower tax rates, the government gives you a rebate on your electricity bill. It makes no difference to the consumer, but it makes a difference to the government facing an election where inflation is one of the key issues. Not only does the rebate make inflation look lower, but it is classed as government expenditure in the national accounts, and is added to GDP making growth look higher.<\/p>\n

It is such a neat trick; they used it more than once.<\/p>\n

Rent inflation is another politically sensitive subject. The official figures show rent inflation declined to 5.8% (Y\/Y) after peaking at 7.8% in August 2023.<\/p>\n

\"Australian<\/p>\n

Low vacancy rates and tight rental markets have driven up rents in most capital cities. However, according to official figures, rent inflation slowed to a 0.1% rise in September 2024, followed by a 0.3% fall in October. The fall was due to an increase in Commonwealth Rent Assistance (CRA). From 20 September, the maximum rate available for rent assistance was increased by 10% on top of the usual biannual CPI indexation, reducing rents for eligible tenants.<\/p>\n

Actual Rent prices increased by 0.5% in September and October 2024, excluding the CRA changes, a 0.6% difference.<\/p>\n

In the previous year, a 15% increase in the maximum CRA rate reduced the official measure by 1.5% over September-October 2023.<\/p>\n

Conclusion<\/h2>\n

Electricity inflation was understated by 14% (18% actual – 4% CPI) in the 12 months to January 2024 and by 10.7% in the 12 months to January 2025.<\/p>\n

Rent inflation was understated by 1.5% in the 12 months to January 2024 and 0.6% in the 12 months to January 2025.<\/p>\n

Headline CPI is understated by 0.68% over the last two years.<\/p>\n

Acknowledgments<\/h4>\n