Wednesday 1 June 2022 06:07 PM Australians will be $745 a month worse off by Christmas as interest rates, ... trends now

A typical Australian family is set to be $670 a month worse off by Christmas as interest rates and grocery costs rise alongside a doubling of petrol taxes and electricity bills.

New Treasurer Jim Chalmers is warning of 'skyrocketing inflation' with the Reserve Bank of Australia widely expected to inflict five more interest rate increases before the end of 2022 in an attempt to put the brakes on price rises.

'This perfect storm of energy price spikes is doing enormous damage to our employers, to our households, and to our national economy,' he said.

'There are far more troubling aspects in our economy: skyrocketing inflation is a big challenge.'

The incoming Labor government wants Australia's lowest-paid workers to be given a 5.1 per cent pay rise in line with the consumer price index.

This would see 2.7 million minimum and award-wage employees receiving the biggest pay increase since 2006 at the height of the mining boom. 

However adding extra labour costs to businesses still dented by the Covid lockdowns will inevitably see that impost passed on to end consumers, pushing the prices of goods and services even higher. 

Mortgages 

Home borrowers with an average $600,000 mortgage last month saw their mortgage repayments climb by $78 after the RBA raised the cash rate for the first time since November 2010.

This typical borrower would now owe their bank $2,384 a month, on a 2.54 per cent variable rate.

But should interest rates rise five more times by Christmas - which is widely tipped by economists - those repayments would rise by $460 to $2,844 as variable rates climbed to 3.94 per cent.

Westpac, Australia's second biggest bank, is expecting the RBA to raise rates five more times this year, starting with a bigger 0.4 percentage point increase in June.

The bank's chief economist Bill Evans is expecting 0.25 percentage point increases also in July, August, October and November.

Australia's economy grew by 3.3 per cent in the year to March, with the official national accounts data showing a 0.8 per cent increase over three months.

'From the Reserve Bank's point of view, these accounts will reinforce the case for further interest rate rises,' Mr Evans said.

'The Bank may see some encouraging evidence in the accounts around wages growth but will be more focused on the clear inflationary pressures now flowing through the economy.

'Inflation pressures were evident in the price measures.'

Last month, the RBA raised the cash rate by 0.25 percentage points, from a record-low of 0.1 per cent, to 0.35 per cent with the big banks all passing on the increase in full.

Petrol 

From September 29, fuel excises are doubling back to 44.2 cents a litre. 

His Liberal predecessor Josh Frydenberg in the March 29 budget temporarily reduced fuel excise to 22.1 cents a litre.

With Australia's gross government debt approaching $1 trillion, Mr Chalmers has ruled out extending that halving in fuel excise and will bump the tax back up to its previous level. 

But since then, Sydney's average unleaded petrol price has surged back to 203.1 cents a litre. 

A family with a Toyota RAV4, Australia's bestselling SUV, would now be paying $111.70 to fill up a 55-litre tank.

But even if petrol prices didn't rise any further, as Russia's war with Ukraine keeps crude oil prices at elevated levels, a doubling of the fuel excise back to 44.2 cents a litre would see fuel bills rise by $12.15 to $123.85.

That's based on pump prices rising to 225.2 cents a litre. 

Over a month, that would add up to $48.60. 

Electricity

A doubling of wholesale electricity prices is set to have the biggest impact of all upon consumers. 

Financial comparison group Finder is predicting electricity prices to climb by up to 100 per cent from July 1, effectively doubling the price.

Canstar calculated an average annual electricity bill in New South Wales of $1,424.

A doubling would see that increase to $2,848, equating to monthly power bills increasing to $237.33 from $118.67 - a hefty rise of $118.67.

Finder energy expert Mariam Gabaji said power prices were set to double in July as Australia grappled with an energy crisis.

'Power prices have more than doubled in the past 12 months and smaller energy retailers are starting to crumble under the pressure, passing on the surging costs to customers,' she said.

'Households which are already stretched to the limit are now confronted with another utility price hike.

'This at a time when the mercury is dropping around Australia, forcing Australians to go to extreme lengths to keep power charges down.'

It is not only bill prices that will rise, but consumers will end up paying more for all goods and services as businesses which themselves face soaring electricity charges respond by putting up their prices to maintain profitability. 

This is occurring as power companies prepare to put up their prices from July 1, with Australian Energy Market Operator data showing a 141 per cent surge in wholesale prices to $87 in the year to March.

Wholesale prices make up about 30 per cent of an energy bill.  

Groceries

German discount Aldi estimates a typical family spends $192.19 a week or $9,994 a year on groceries.

In a month, that works out at $832.83.

Should inflation stay at 5.1 per cent, that would equate to a $42.47 increase taking groceries to $875.30.

In the year to March, fruit and vegetable prices rose by 6.7 per cent following floods along the east coast of Australia as meat and seafood prices went up by 6.2 per cent. 

Anthony Albanese faces a mammoth challenge with skyrocketing inflation, rising interest rates and families struggling to get by. How he handles the economy will define his time in power, writes CHARLIE MOORE 

Anthony Albanese could not stop smiling as he posed for photos with his new ministers outside Government House after they were sworn in on Wednesday.

But just 7km away in Parliament House the mood could not have been more different as new Treasurer Jim Chalmers delivered a sombre press conference warning the economy is facing some 'dire' challenges.

Australians are enduring skyrocketing inflation with rent, groceries, electricity and fuel prices all soaring.

They will also likely be hit with a second interest rate hike in two months when the Reserve Bank meets on Tuesday - and several more rate rises before Christmas. 

With economic growth nearly stagnant at 0.8 per cent in the first three months of the year, Dr Chalmers wasted no time in blaming the Coalition for leaving him a 'mess' to clean up.

'Consumption, dwelling investment, new business investment, export and the nominal GDP were all weaker in the March quarter than what was anticipated by our predecessors in the budget,' he said.

Of course, this was a political attempt to shield the new government from blame if the economy goes south - but in some ways it was justified.

It was reported this week that Scott Morrison ignored Treasury advice when he decided to splash $8.6 billion on three cost-of-living measures in the March Budget in an 'economically dumb' bid to get re-elected.