Inflation data is out for the September 2023 quarter, but there is no reason for celebration.

The root cause of inflation is excessive growth in the money supply, meaning growing faster than the economy overall. For the 5 years to 30 September 2023, the total growth in Australia’s broad money supply was 41%. Consumer prices grew by 19% over this time and producers’ prices grew by 15%.

Over this time period, the national measure of GDP growth was distorted by COVID. This chart shows the dislocation.

The very large spikes down then up in 2019-21 almost cancel themselves out, suggesting a large part of the issue was measurement anomalies. However, it is clear that the annual rate of GDP growth has been less than 4% for a long time. Even if we assume it was 4% pa over the 5 years to 30 September 2023, that amounts to around half the growth in the broad money supply.

Thus the central bank continues to inflate the money supply which continues to erode the value of money and so prices continue to rise. It’s not rocket science. Even if money growth was cut to zero, there is still a big wave to come and work its way through prices.

On a related note, the Bureau of Statistics measures per capita GDP growth. This is currently negative. A positive aggregate GDP growth rate at the same time as negative per capita GDP means we are all getting worse off. Only net migration is propping up the aggregate. That explains why the Federal Government will not constrain immigration, because of the statistical embarrassment of reporting a recession. The politicians turn a blind eye to the housing market crisis that is driven primarily by excessive immigration.