Working from Home, Childcare Boosts Consumer Spending


A reversal of the free childcare provided during the height of the Covid-19 has contributed to higher consumer prices for the September quarter.

Following a second quarter plunge in the Australian Bureau of Statistics headline consumer price index prices, the economy now seems to be back on an upward path.

Over the June quarter, a 95 per cent decrease in childcare costs, falling rents and plunging petrol prices through the three months drove the steepest fall on record in the consumer price basket.

Over the September quarter, childcare, petrol and travel, as well as household furnishings have all contributed to the lift in prices, while food and pharmaceuticals went backwards.

Childcare was the most significant price rise from June to September, with the cost of pre-school and primary education jumping 11.1 per cent after the government's early childhood education and care relief package ended.

The federal government brought an end to its temporary childcare support on 13 July, and this comprised 0.9 percentage points of the 1.6 per cent lift in CPI in the September quarter. Consumer prices increased 0.7 per cent year-on-year.

ABS head of prices statistics Andrew Tomadini said without the rise in childcare, the CPI would have increased by 0.7 per cent.

▲ Childcare still remains 26 per cent below the March 2020 level.
▲ Childcare still remains 26 per cent below the March 2020 level.

Executive director of community group The Parenthood, Georgie Dent, said the CPI figures revealed federal assistance for early learning and care is lagging behind the actual cost of quality early learning and care services.

“Out-of-pocket early learning and childcare costs are placing a real strain on household budgets for parents across the country during a recession and as cuts to JobKeeper and JobSeeker support payments take effect.

“Investing more in early education and care will pay dividends in supporting more women into paid work, grow employment in a female-dominated industry and give young children the education and care that will help them thrive,” Dent said.

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.

Petrol prices rose 9.4 from the June to September quarter due to partial recovery in world oil consumption and reduction in global oil production.

Massive spending on products to set up home offices due to more flexibly working Australians drove an incredible 12 per cent jump in prices for furnishings, household equipment and services.

Rises of 6.4 per cent in furniture and 5.3 per cent in major household appliances helped lift household spending.

▲Covid restrictions factored into the rise, with inflation increasing only 0.9 per cent in Melbourne while it rose 1.8 per cent in Sydney and 2.3 per cent in Brisbane.
▲Covid restrictions factored into the rise, with inflation increasing only 0.9 per cent in Melbourne while it rose 1.8 per cent in Sydney and 2.3 per cent in Brisbane.

Rents fell again in most capital cities over the quarter because of weak demand for properties and high vacancy rates amid the economic impact from coronavirus, with nearly one million Australians unemployed.

REIA president Adrian Kelly said rents fell for the quarter in all capital cities except Canberra, which had an increase of 0.2 per cent.

“This is the first annual fall in the history of the series when ABS started it in 1973.

“Rents fell in the September quarter in most capital cities due to continued weak rental market conditions, with renters moving to cheaper areas and negotiating lower rents,” Kelly said.

The largest drop was 0.7 per cent in Darwin and the smallest was 0.1 per cent in Brisbane giving a weighted capital city fall of 0.2 per cent for the quarter and a fall of 1.4 per cent for the year.

Earlier this month, the Reserve Bank also altered its inflation stance and said it will put “greater weight on actual, not forecast, inflation” for “at least” three years and that interest rates would remain locked in at record lows for that time.

The Reserve Bank has also altered its inflation stance, with governor Philip Lowe revealing in mid-October that the central bank will put “greater weight on actual, not forecast, inflation”.

Over the September quarter core trimmed inflation, which the Reserve Bank monitors, rose 0.4 per cent in the quarter with the annual rate at 1.2 per cent.

The RBA is expecting gross domestic product for the September quarter will track positive, following its steep fall in the previous quarter by 7 per cent.

Earlier this week, RBA deputy governor Guy Debelle said he expects Australia’s economy to “grow” across the September quarter, ending the first recession in three decades.

RBA governor Philip Lowe has committed to keep rates low for the coming three years as a way to instil confidence in borrowers that interest costs will stay low for an extended period.

The signals coming out of the money market all point to a growing probability the RBA will cut interest rates again to 0.1 per cent from 0.25 per cent when the RBA board meets next week.

The central bank is also expected to ramp up its bond buying program to help the battered economy.

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