05 March, 2024
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In Australia, prices ease but insurance and housing are still biting

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The rate of inflation may be slowing but price increases across hard-to-avoid expenses, such as insurance and housing, are keeping pressure on hip pockets.

Insurance prices as measured in the December quarter consumer price index rose 3.8 per cent over the quarter to be 16.2 per cent higher annually, which the Australian Bureau of Statistics said was the largest annual increase in 23 years.

Compare the Market economic director David Koch said destructive weather events were partly responsible.

“Unfortunately, these wild weather events increase the risk of claims being made to insurers, so they typically up prices for everyone,” Mr Koch said.

 Residents have been left to clean up the damage after wild weather lashed Queensland. Image by Darren England/AAP PHOTOS 

The elevated cost of rebuilding and repairing damaged homes, including labour and materials, was also feeding into higher costs for insurance.

He said insurance companies regularly changed their risk ratings and it was possible to find savings by checking policies frequently and not letting them renew automatically.

Housing prices, the biggest component of the consumer price index and including new builds, renovations and rents, also remain elevated.

Westpac senior economist Pat Bustamante said costs for residential construction were moderating but developers and builders were likely trying to build in higher margins to protect themselves from future uncertainty.

He said a number of developers and builders had found themselves in financial trouble due to higher interest rates as well as still-high costs for materials and workers.

 Rental price growth also remains strong, commonwealth assistance has taken the edge off a little.
Image by Lukas Coch/AAP PHOTOS
 

Rental price growth also remains strong, although the ABS said higher Commonwealth Rent Assistance took the edge off the quarterly increase.

Rents recorded a 0.9 per cent quarterly increase, lower than the 2.2 per cent lift in September.

“The big kind of drama is you’ve got a big increase in demand and supply has been inelastic, and it’s not going to really respond in a higher interest rate environment,” Mr Bustamante said.

But he was expecting some heat to come out of the rental market in the future as population growth steadied from the post-pandemic boom, leading to lower housing demand. 

Renters have also been forming larger households in response to stretched affordability, further helping to weaken demand.

Mr Bustamante said the overall inflation story was positive.

“We’re seeing global disinflation happen quite a bit more quicker than what we anticipated.”

The data revealed solid progress on goods inflation and services, with a few exceptions, were largely softening after spiking in the September quarter. 

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