Scott Morrison is quick to blame the largest spike in inflation in more than two decades on international factors, such as the war in Ukraine, as well as supply chain disruptions caused by the COVID-19 pandemic.
But Australian exporters are also enjoying the biggest price boom in almost half a century, largely on the same factors.
The prime minister said his government has been able to “shield” households from rising prices with a cost-of-living support package in last month’s budget that included slashing fuel excise for six months.
This, he said, was only achievable through his government’s “economic plan” and a $100 billion turnaround in the budget bottom line.
But new figures also show national income received a massive lift in the March quarter through soaring export prices – a major boost to the budget bottom line and outside the government’s control.
“Australia is in the midst of another commodity price boom,” Commonwealth Bank senior economist Belinda Allen said.
“Offshore events including the war in the Ukraine and strong demand for coal and iron ore have led to a surge in commodity prices.”
The Australian Bureau of Statistics said goods exports jumped 18 per cent in the March quarter, the highest rate since records began in 1974.
Annual export prices were up a massive 46.7 per cent.
Surging global demand for coal saw export prices up 32 per cent in the quarter, and an extraordinary 243.4 per cent higher than a year earlier.
Meanwhile, the ABS said import prices rose 5.1 per cent and 19.3 per cent through the year.
Allen says this has seen the nation’s terms of trade rise by around 10 per cent in the quarter, boosting company profits and government tax revenue.
“The budget position will continue to be helped by elevated commodity prices,” she said.
These results came after Wednesday’s data showed annual domestic inflation surged to 5.1 per cent as of the March quarter, its highest level in more than two decades and up sharply from 3.5 per cent three months earlier.
It is well above the Reserve Bank of Australia’s two to three per cent inflation target, and points to an interest rate rise sooner rather than later.
Financial markets are fully pricing in the risk of a 0.15 per cent increase in the cash rate to 0.25 per cent when the RBA board meets on Tuesday, and predict further increases in coming months.
If correct, it would be the first rate hike in an election campaign since 2007, a poll former Liberal prime minister John Howard went on to lose.
Morrison said he respects the RBA’s independence and it will make its judgement in the best interests of the economy.
“There is a big difference between what occurred in 2007 and where we are at now,” the prime minister told the Seven Network.
“The last time the Reserve Bank did that the rate was 6.5 per cent, today it is 0.1 per cent. So I think the circumstances of the economic environment we’re in now is very different.”
But shadow treasurer Jim Chalmers said the latest inflation figures have “absolutely torpedoed” Mr Morrison’s claims on economic management.
“It wasn’t that long ago that Scott Morrison was running around, lying to the Australian people and saying, ‘if you elect a Labor government, your interest rates will go up’. And that’s blown up in his face,” Dr Chalmers told reporters.
A new ABS survey also found well over half of businesses are experiencing cost pressures and few had been able to pass on these increases to their customers in full.
with news from AAP