The price of groceries will permanently be higher. Picture: NewsWire / Monique Harmer
Milk, bread, petrol and other staples will be a permanent “sting” for Australian shoppers, with the Reserve Bank confirming the higher cost-of-living is here to stay.
RBA assistant governor Sarah Hunter on Tuesday warned households that prices will never return to pre-pandemic levels.
“The cost-of-living is now higher and we are not trying to bring the price level down,” she told the Australian Finance Industry Association conference on Tuesday.
“My personal price point on this is the milk I get in the supermarket every week, which is an awful lot more expensive than what it was pre-Covid.”
The price of groceries will permanently be higher. Picture: NewsWire / Monique Harmer The RBA says grocery prices won’t return to pre-Covid prices. Picture: NewsWire / Monique Harmer
Ms Hunter said while the bank targets inflation, it wants to keep prices within a range and they don’t aim for deflation.
“The price of milk will not go back to where it was pre-Covid, same with bread, other staples, petrol and so on,” she said.
“We all have to get used to that and we know it’s tough and it stings when you do your weekly shop.”
Despite higher prices, Ms Hunter said over the past 12 months households were beginning to get on top of prices.
“Household conditions look like they are starting to improve, with a number of the fundamentals having started to turn in the last year or so,” she said.
“We are now in a position where wages are growing faster than prices, so the average workers are taking more home in real terms.
“We also have the stage three tax cuts that came in a year ago and, if you have a variable mortgage, you’ve had three interest rate cuts.”
Even with higher prices, Ms Hunter says the average Aussie is doing better than 12 months ago. Picture: NewsWire / Martin Ollman
But the assistant governor conceded there are pockets still feeling the pinch.
“There are always people experiencing difficult circumstances. We know that and it can be particularly challenging … those people are still there,” she said.
“Generally the measures of stress are starting to come off.”
Ms Hunter also conceded the benefits of rate cuts are not universal with those looking to get into the housing market or older Australians with savings doing worse compared to those with a mortgage.
She also said underlying inflation is getting close to the bank’s midpoint target of between 2 to 3 per cent and employment would likely to remain at its current levels.
Underlying inflation, which strips out the more volatile items came in at 2.7 per cent over the June quarter.
During its rate cutting cycle the RBA has cut interest rates three times – in February, May and August – by 25 basis points on each cut.
Money markets are pricing in the bank will hold interest rates during its September meeting, but are expecting one more interest rate cut in November.