Business
Inflation Australia figures: Good news as CPI drops
Inflation Australia figures: Good news as CPI drops
Australian home borrowers could be spared further interest rate rises with inflation in July moderating to 4.9 per cent – the lowest level since early 2022.
The monthly consumer price index measure showed headline inflation falling from an annual pace of 5.4 per cent in June, providing some rare good news during a cost of living crisis.
Headline inflation is now back at the lowest level since February 2022 – before Russia’s Ukraine invasion pushed up petrol prices and exacerbated price pressures as Covid lockdowns worsened global supply chain constraints.
The monthly increase was below market expectations of a 5.2 per cent inflation rate for July.
AMP deputy chief economist Diana Mousina said this meant the Reserve Bank could stop raising rates.
‘Looking ahead, unless wages growth surprises to the upside or inflation starts heading up again (rather than down), interest rates are likely to remain unchanged throughout the rest of 2023,’ she said.
‘We still see the risk of rate cuts in 2024.’
Prices for petrol, fruit and vegetables have dropped over the year, as electricity and gas bills soared by double-digit figures and rent kept on climbing, new Australian Bureau of Statistics figures released on Wednesday showed.
Australian home borrowers could be spared further interest rate rises with inflation in July moderating to 4.9 per cent (pictured is a Sydney Woolworths shopper)
Despite a weaker Australian dollar, petrol prices fell by 7.6 per cent over the year, tracking some movements in crude oil prices (pictured is a Sydney service station)
Overall inflation is still above the Reserve Bank’s two to three per cent target but the moderation in price pressures could see the cash rate left at an 11-year high of 4.1 per cent, following 12 rate rises since May 2022.
‘While there is still some way to go before inflation is within the 2-3 per cent RBA inflation target, fears of entrenched high inflation and permanent sticky prices have not eventuated,’ Ms Mousina said.
Philip Lowe is next week presiding over his last board meeting as RBA governor before handing over to his deputy Michele Bullock on September 18, having imposed the most severe interest rate increases since 1989.
Despite a weaker Australian dollar, petrol prices fell by 7.6 per cent over the year, tracking some movements in crude oil prices that have taken unleaded prices in capital cities back below $1.90 a litre.
Fruit and vegetable prices fell by an annual pace of 5.4 per cent but bread and cereal prices rose by 9.9 per cent as diary product prices increased by 12.7 per cent.
Philip Lowe is next week presiding over his last board meeting as RBA governor before handing over to his deputy Michele Bullock on September 18, having imposed the most severe interest rate increases since 1989
The monthly increase was below market expectations of a 5.2 per cent inflation rate for July. AMP deputy chief economist Diana Mousina said it meant the Reserve Bank could stop raising rates
Housing costs are still increasing, with rents surging by 7.6 per cent over the year following an influx of international students into Sydney and Melbourne, in particular.
Electricity prices soared by 15.7 per cent, despite energy bill relief measures that saw eligible households in NSW, South Australia and Tasmania get $500 rebates as part of a federal government program in partnership with the states and territories.
The annual increase in July was even more severe than June’s 10.2 per cent increase.
Gas prices last month climbed by an annual pace of 13.9 per cent.
Underlying measures of inflation, stripping out volatile price items, were still on the high side.
The consumer price index stood at 5.8 per cent in July, when petrol, fruit prices and holiday accommodation, was removed from the official basket of goods calculations.
