Australians are being warned they could need to start paying more for everyday items as the cost of living reaches new heights. So, why is this happening, which purchases are the worst-affected and can we expect any reprieve?
The short answer is inflation, but it's not that simple.
AMP Capital's chief economist Shane Oliver says the inflation rate relates to Australia emerging from COVID-19 restrictions.
"The pandemic really distorted the economy. We couldn't spend on services, so we spent all our money on goods at a time when the production of those goods, whether it's household furnishings, whether it's a new car or a new boat or a renovation on the house. Unfortunately, the supply of those goods was constrained. So we had more demand, but supply, the prices went up. And of course, the danger is that that may become entrenched like it did in the 1970s and will take a while to get back down."
The Grattan Institute's economic policy program senior associate, Alex Ballantyne, says there's been a series of supply shocks, disruptions to the usual production and distribution of goods.
"The pandemic, floods, war - it can feel a bit biblical at times - all of this is weighing on the supply of goods and so, maybe factories have to close due to COVID, the cost of shipping has gone up a lot, staff shortages, all these kinds of things affect different goods in different ways, but typically tend to push the prices up."
