The Consumer Price Index (CPI) is an important measure of inflation in the Australian economy. The CPI measures the price change of a ‘basket’ of goods and services purchased by Australian households. According to the 2015-16 Household Expenditure Survey, on average, Australians spend approximately $2,300 on automotive fuel each year. This is reflected in the measurement of the CPI with a weight of 3.3 per cent of the CPI basket.
Automotive fuel prices are often volatile, which can have a significant impact on the rate of inflation measured by the CPI. A recent example of this was following the outbreak of COVID-19, where prices for automotive fuel fell 20 per cent in the June 2020 quarter, contributing nearly half of the record 1.9 per cent quarterly fall in the CPI. Following the low point in mid-2020, fuel prices have increased 45 per cent up to the December 2021 quarter.
This article explains how automotive fuel is measured in the CPI and provides a summary of some important events which have impacted fuel prices in Australia.