Petrol prices are set to surge above $2 a litre this long weekend as new details emerge about what is really driving inflation.
Motorists have been urged to sniff around for bargains before the King’s Birthday break, with analysis uncovering as much as 45 cents difference between the cheapest and most expensive fuel.
Capital city drivers are paying $1.91 a litre, on average, with prices already breaking $2 in many pockets of Sydney.
Compare the Market energy expert Chris Ford said the city was already working through the upswing of its fuel cycle, with the average price $1.95 a litre.
The growth phase of Melbourne's cycle is also under way but Mr Ford said it was still possible to secure a low price.
“However, we don’t expect these prices to stick around, with the city-wide average for Unleaded 91 currently at $1.98,” he said.
Households are already feeling the squeeze without the unwelcome surge in fuel prices, with fresh evidence corporate profits are contributing significantly to higher consumer prices.
Think tank The Australia Institute and unions have been arguing companies have been charging more than their growing input costs and pushing up inflation and this was doing more to drive up prices than expanding worker pay packets.
The Reserve Bank and Treasury have cast doubt on this suggestion, with both arguing outside the mining sector, corporate profits bear little responsibility for Australia's inflation problem.
A deep dive into the issue by the Organisation for Economic Co-operation and Development found profits were doing more to push up inflation than wages in Australia, especially when inflation first started rocketing last year.
The research by the major international economic body noted Australia's labour costs have recently lifted and are now contributing a much larger share to the overall inflation picture but still not quite as much as corporate profits.
The analysis of several major economies found profits and labour costs were contributing to inflation in a manner not seen since the 1970s.
But inflation was much higher five decades ago because of much stronger wage pressures.
Most of the higher profits stemmed from the mining and utilities sectors, the OECD researchers noted, including in commodity-exporting economies such as Australia.
The Australia Institute director Jim Stanford said companies in Australia and overseas were taking advantage of the disruptions and shortages during the pandemic to push up profit margins beyond normal levels.
Dr Stanford said the Reserve Bank was blind to the role of corporate profits in driving inflation.
"The RBA continues to ignore the role of profits in driving prices, while doubling down on its determination to suppress wage growth,” he said.
Australia's central bank, which opted for another interest rate hike this week, has flagged high unit labour costs as a risk to its plan to return inflation to target.
But Governor Philip Lowe maintains he is more worried about sluggish productivity growth than big increases to nominal wages.
The aggressive policy tightening is clearly starting to weigh on the economy, with Deloitte Access Economics partner David Rumbens warning of a "consumer recession" later this year.
Australia is already experiencing a retail recession - two quarters in a row of declining spending in inflation-controlled terms - and Mr Rumbens says the nation could soon have a similar pullback in services as well as goods.
Also on Thursday, official data showed Australia's trade surplus dipping to $11.1 billion in April from $14.8b in March.
