Food and fees costing households more

Big price jumps for fruits and vegetables, cigarettes and domestic holidays at the end of last year have pushed up the inflation rate to levels not seen in two years.

The stronger-than-expected rise in the price of goods and services in the three months up to December made the odds of another interest rate cut by the Reserve Bank this year unlikely.

The figures, which were released by the Bureau of Statistics on Wednesday, showed the headline inflation rate had risen 0.8 per cent last quarter to take the annual rate to 2.7 per cent.

Simultaneously, ''government'' inflation, which looks at how much Australians pay for government fees, charges, taxes and regulated prices, rose to 5.7 per cent, Deutsche Bank's chief economist Adam Boyton said.

Such inflation was estimated to have cost the average Australian household more than $1000 last year, Mr Boyton said.

A separate measure of consumer confidence by Westpac and the Melbourne Institute, which was also published on Wednesday, found sentiment had slipped for the second straight month to its lowest level since July.

The gains in confidence made after the September federal election were lost, as concerns about unemployment grew and cheer over house price rises faded, Westpac chief economist Bill Evans said.

The price of fruit soared by 8.1 per cent in the three months, while vegetables were 7.1 per cent more expensive during the same period, the new data showed.

Holidays also cost more for Australians. Domestic travel and accommodation costs increased 6.9 per cent while prices for international trips edged up 2.6 per cent. Cigarette prices were pushed up 2.2 per cent as a government tobacco excise kicked in.

The sharpest fall in prices for the three months was for petrol, which eased by 1.1 per cent.

Some of the price rises, including the jump in fruit and vegetable costs, were a result of one-off factors such as weather, UBS interest rate strategist Matthew Johnson said.

A weaker dollar also meant the lower prices Australians have been paying for imports could soon be a thing of the past, economists said. Inflation for such goods has remained very low, but rose to its highest annual level in two years in the December quarter.

Treasurer Joe Hockey said the inflation rate had been driven up by the previous Labor government through its carbon tax.

smh.com.au

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