Inflation in Australia

A short history of inflation in Australia

The Korean War Wool Boom (1950 to 1952)

Australian inflation peaked at 25.6% in the year to the fourth quarter of 1951, and the cause was wool. The Korean War began in June 1950 and military demand sent the wool price up roughly two and a half times within nine months. Australia was the world's largest producer, and the export earnings flooded into an economy already running at capacity, with wartime price and wage controls recently abandoned and policy still set to guard against a return of recession.

Inflation Targeting (1993 onwards)

The boom ended as abruptly as it began. Inflation returned with the oil shocks of the 1970s and was brought down over the following decade, and in 1993 the Reserve Bank of Australia adopted an inflation target, choosing to express it as 2 to 3% on average over the cycle rather than as a fixed number to be hit each year.

Post-Covid Inflation (2021 to 2023)

In Australia, prices rose fastest in Q4 2022, at 7.9%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.