DAVID KOCH: Australians have cut enough budget fat to beat inflation, it’s time for the government to step up

Australians don’t deserve another interest rate hike and financial markets are almost certain the Reserve Bank will not raise interest rates at its board meeting next Monday and Tuesday.

After yesterday’s June quarter CPI figures it’s clear that Australians have been tightening their financial belts as they cope with the cost-of-living crisis and the biggest inflation cost drivers are ones beyond our control. The costs which our consumer behaviour has absolutely no influence on.

Looking at the breakdown of the figures of the CPI basket, the big drivers of inflation in the June quarter were rents, petrol prices, building costs and fruit and vegetables.

Fruit and veg price rises were not driven by Aussies going overboard eating their greens but by poor weather conditions impacting growing conditions.

Petrol prices didn’t go up because we’re pumping more into our gas guzzlers, but because of the global oil price and the weak Australian dollar making oil imports even more expensive.

Building costs are rising because of the labour shortage and high cost of building materials, not because we’re building more houses than normal. In fact, governments are the main reason for the shortage of home-building workers and more expensive building materials because of their huge infrastructure and renewable energy projects which are sucking up jobs and materials.

As for rents, the surge is because of the housing shortage combined with big migration levels which governments simply didn’t plan for. We desperately need migrants. They are good for the country and good for the economy. But you just can’t turn on the tap without planning on how to house, transport and care for them.

The only item in the CPI basket which could counter my argument is the strong rise in clothing and footwear prices which is discretionary spending and which had been subdued in recent months on lower demand and retailer discounting. But the Bureau of Statistics pointed out the higher June figures reflected new winter stock being brought into stores that isn’t yet being discounted.

To reinforce the point, the latest June retail trade figures were also released on Wednesday and showed retail volumes were up, but it was because we were taking advantage of the End of Financial Year sales.

Spending at cafes and restaurants was flat which is why so many are going out of business and why there is a plague of “For Lease” signs on empty shops.

The June quarter CPI figure came out right in line with expectations — 1 per cent for the June quarter and 3.8 per cent for the past 12 months which was slightly higher than the 3.6 per cent for the year to March. But the RBA looks at the trimmed mean figure which takes out any volatile elements of the CPI basket of goods and services. That figure dropped from 4 per cent in March to 3.9 per cent in June.

That was seen by economists as a good sign because the result was down slightly and it was widely predicted after a volatile few months of figures which surprised analysts. Markets don’t like surprises and are easily spooked.

The share market rose strongly on the back of the predictable result and the Australian dollar dropped below US 65 cents as financial markets now put the odds of an RBA rate hike next week at just one-in-10.

It’s obvious the economy has slowed to a crawl, and the RBA is wary of tipping us into a hard recession.

But what I’m wary of is the number of, mainly big, businesses using inflation as an excuse to put up prices — but putting them up by more than inflation. There should be a public Inflation Shame Register to reveal those companies that fuel even more inflation. Make them prove their costs have gone up by more than inflation to justify their price hike.

I’m looking at you Telstra. Last year it put up prices 7 per cent because of “cost inflation” but they picked the peak inflation figure rather than the then-current figure of 5 per cent. Telstra customers get another price hike this month which is, again, higher than inflation and will add to the “telecommunications” figure in the August CPI basket.

I always assumed a technology business would benefit the most from the introduction of new technology to make them more efficient and reduce costs.

Big business is treating us like suckers. They believe we’re now so accustomed to inflation that we’ll just accept these prices increases as the norm. And Telstra is not the only company ripping us off.

Insurance premiums increased 14 per cent over the past year, supposedly to offset an increase in the intensity and severity of natural disasters. If general insurance companies are doing it so tough, why are the share prices of IAG and QBE at two-year highs because of strong profit results?

Wage growth is also a contributor to inflation but the biggest growth is government wages which is well ahead of business wage growth. Federal and State governments are passing on large wage rises which feeds into inflation and puts more pressure on interest rates.

Governments need to help in the inflation fight as well by being more prudent in their spending rather than leaving the heavy lifting to the RBA and us consumers.