Australia's cost of living crisis worsens with inflation hitting a new 32-year high

Australia's cost of living crisis has worsened with inflation hitting a new 32-year high of 7.8 per cent.

The consumer price index in the year to December surged at the fastest annual pace since the March quarter of 1990. 

This means another interest rate rise on February 7 is almost a certainty with headline inflation well above the Reserve Bank's 2 to 3 per cent target.  

The Australian Bureau of Statistics figure, for the December quarter, was slightly less severe than the Reserve Bank's forecast of 8 per cent, with the CPI rising by 7.3 per cent in the September quarter. 

Housing costs last year climbed by 10.7 per cent as food as non-alcoholic drink prices rose by 9.2 per cent. 

A closer breakdown of grocery items showed a 12.2 per cent annual surge in bread and cereal prices and an even more severe 14.9 per cent climb in dairy prices. 

Petrol prices last year climbed by 13.2 per cent, after rising above $2 a litre in March as Russia's Ukraine invasion led to sanctions that pushed up global crude oil prices.

With state borders open again, domestic holiday costs soared by 13.3 per cent over the year. 

Home borrowers since May have copped eight consecutive monthly rate rises and the big banks are all expecting the Reserve Bank to raise rates again in February by another quarter of a percentage point.