The Australian monthly consumer price index (CPI) has risen 4% in the 12 months to May 2024 with the biggest price increases across fuel (9.3%), rent (7.4%), and electricity (6.5%).
The CPI is a general measure of prices for goods and services purchased by Australian households. Changes in the CPI provide a measure of household inflation.
The index is up from a 3.6% increase in the 12 months to April.
The annual movement for the monthly CPI indicator, excluding volatile items and holiday travel, was also 4% in May, down from 4.1% in April.
Annual trimmed mean inflation was 4.4% in May, up from 4.1% in April.
Charu Chanana, head of FX strategy for Danish investment bank Saxo Bank, says there are no surprises arising from the latest round of data, with both headline and trimmed mean CPI coming in higher than expected.
“This will give room to the RBA to continue beating the rate hike drum for now and will also support the AUD, particularly on the crosses against currencies of central banks that remain dovish (such as Japan’s JPY or Switzerland’s CHF),” she says.
“But the real test will be the quarterly inflation print that comes out 31 July, ahead of the RBA’s August meeting.”
The 6.5% increase in electricity prices is up from a 4.2% hike in the 12 months to April and 5.2% in the year to March.
The Australian Bureau of Statistics says the increase in the annual movement is due to the gradual unwinding of the Energy Bill Relief Fund rebates. This led to a 1.4% rise in electricity prices in monthly terms in May.
While the Australian and some state governments are rolling out additional electricity credits to households, the continued increase in power prices demonstrates a dire need for Australia to diversify its energy supply.
Last week, the Australian Liberal Party reignited the nuclear debate with revelations that it plans to build seven nuclear power plants on old coal-fired power sites around the country, starting in 2035.
The opposition’s head, Peter Dutton, says it is part of the Liberal Party’s plan to deliver cleaner, cheaper, and consistent electricity.
But there is a great deal of scepticism over whether nuclear power could become a reality in Australia, let alone by 2035.
The Australian Energy Market Operator (AEMO) says in its integrated system plan that the possibility that replacement generation is not available when coal power stations retire is “real and growing, and a risk that must be avoided”.
“The sooner firmed renewables are connected, the more secure the energy transition will be.”
AEMO argues that new solar and farms will need to rise six-fold to reach 58 gigawatts (GW) and 69GW, respectively, by 2050.
Wind, in particular, is one of the cheapest sources of power generation.
Australian Energy Minister Chris Bowen says AEMO’s report calls for urgent investment in generation, storage and transmission.
“AEMO tested 1,000 scenarios to identify the lowest-cost plan that would also meet our growing electricity needs and keep the grid reliable between now and 2050,” he says.
“It is in stark contrast to the Coalition’s anti-renewables nuclear plan which will see Australians pay hundreds of billions for the reactors alone, would provide at best 4% of Australia’s energy needs by 2050, and could add $1,000 a year to energy bills.”
A recent analysis by the Smart Energy Council shows it will cost between $116 billion and $600 billion to build the seven nuclear reactors proposed.
This is the same cost as delivering 82% renewables by 2030 and an almost 100% renewable energy mix by 2050, including the cost of building all of the enabling transmission infrastructure.
AEMO estimates the capital cost for new transmission lines, plus all the new utility-scale solar, wind, storage, hydro and gas required to meet Australia’s energy needs by 2050, would amount to around $122 billion.
The adoption of products such as solar panels, batteries, smart systems and electric vehicles can also reduce the need for up to $4 billion in additional grid-scale investment.
AEMO Chief Executive Officer Daniel Westerman says consumers are already a driving force in Australia’s energy transition and this is set to continue.
One in three households now have rooftop solar, and the uptake of batteries and electric vehicles is also on the rise.
“If consumer devices like solar panels, batteries and electric vehicles are enabled to actively participate in the energy system, then this will result in lower costs for all consumers,” he says.
Write to Angela East at Mining.com.au
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