CRYPTOCIES

Australian Inflation Hits 21 Year High As Crypto Market Eclipses $1 Trillion


The Australian consumer price index (CPI) has risen to 6.1 percent for the 12 months ending June 30, the country’s highest inflation level since June 2001:

Just over a year ago, some raised alarm bells as the CPI increased to 3.8 percent. At the time, academics provided a host of reasons not to worry, and this view was supported by the Reserve Bank of Australia (RBA), which expected inflation to reduce to 1.5 percent in 2022. As it turns out, the projections were all wrong.

According to the latest report by the Australian Bureau of Statistics (ABS), the CPI has risen by 1.8 percent over the past quarter and 6.1 percent over the past year.

CPI fluctuations over the past decade. Source: ABS

Of course, the CPI metric is in itself not uncontroversial, since virtually everyone has a different rate of inflation depending on levels of income, consumption habits, location and the like.

Furthermore, when the method of calculating inflation changes, as it frequently does, it almost never results in an increase in CPI, only a decrease. Cynics would call that political expediency.

Transport, Housing Largest Contributors to CPI

Notwithstanding, a weighted average across Australia’s capital cities provides insight as to the largest overall contributors to the official CPI figure, most notably transport (13.1 percent) and housing (9 percent):

Weighted average of eight capital cities. Source: ABS

Australian Treasurer Jim Chalmers described the latest inflation figures as “confronting”, adding that things would likely get worse before improving:

These numbers are obviously for the June quarter, and there is price pressure to follow the period that we are learning more about today.

Jim Chalmers, Australian Treasurer

Given the current inflationary pressures, the RBA is expected to once again hike interest rates next week, with analysts pointing to 0.5 percent and 0.75 percent as being the most likely increases.

Crypto Market Rises

Across the pond, shortly after the US Federal Reserve increased the federal funds rate, the overall crypto market lifted from around US$970 million to just shy of US$1.05 trillion at the time of writing.

BTC and ETH both posted strong overnight gains of 9 and 12 percent respectively, amid growing signs that the broader crypto market contagion may be somewhat contained.

Nonetheless, the broader macro environment remains uncertain and highly volatile. In the short to medium-term, however, it remains to be seen whether this latest relief rally is an indicator of a market sentiment shift or merely a temporary respite from the biting crypto winter.

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