Inflation in Australia reached its highest point in the last five and a half years during the first quarter of 2020, but is expected to drop in the second quarter.
Buoyed largely by a 0.3% rise in the headline consumer price index (CPI) during the first three months of this year, annual inflation rose to 2.2% – up from 1.8% in the final quarter of 2019. This reading outstripped the forecast of 2% and marked inflation’s highest point since 2014.
Prices did not move up in unison, however. Food and beverage costs spiked by 1.9% while prices of discretionary goods and services declined. This was due in large part to supply shortages caused by droughts and exacerbated by the bushfires.
Vegetable prices shot up a whopping 9.1%, while meats, fruits, and cereals also saw significant increases.
Grocery prices were additionally driven up in March by large-scale panic buying of household products and food.
“There were some price effects of COVID-19 apparent in the March quarter due to higher purchasing of certain products towards the end of the quarter, as restrictions came into effect,” said an Australian Bureau of Statistics report.
With COVID-19 dramatically driving down oil prices and causing large swaths of the economy to stall, a big drop in inflation is expected.
“Our early forecast for Q2 inflation is for a 1.9% decline in the headline CPI, which would see annual deflation of 0.4%,” said NAB economist Kaixin Owyong.