In his speech yesterday to the Anika Foundation, Reserve Bank of Australia (RBA) governor, Phil Lowe, blamed spiking energy costs for driving the “unexpected surge in inflation”:
One starting point for understanding the unexpected surge in inflation is the big lift in energy prices stemming from Russia’s invasion of Ukraine and various problems in the production of energy around the world. Analysis by the European Central Bank suggests that around three-quarters of the surprise in inflation in the euro area reflects unexpected developments in the markets for oil, gas and electricity. In the United Kingdom, the Bank of England estimates that higher energy prices will directly boost CPI inflation by 6½ percentage points this year. And in Australia, the price of petrol at the bowser increased by 32 per cent over the past year (Graph 4). The direct effect of this alone has been to add 1.2 percentage points to Australia’s CPI inflation, and on top of this there are second-round effects of higher fuel prices.
Curiously, Phil Lowe did not mention the escalation of East Coast gas and electricity prices.
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
