Futures now imply only a 9% chance of a quarter-point rise in the 3.6% cash rate in May, compared with about 20% prior to the release of the inflation figures. Inflation refers to the process of goods and services becoming more expensive over time and in Australia it is measured by the CPI, or Consumer Price Index. The RBA aims to keep the CPI between 2 to 3%, but a range of factors can increase demand on certain goods and services, pushing up prices. Inflationary pressures can be the cause of global disruption, supply chain constraints or high demand.
- Inflationary pressures can be the cause of global disruption, supply chain constraints or high demand.
- “Prices for medical and hospital services typically rise in the March quarter as GPs and other health service providers review their consultation fees, and the Medicare Safety Net is reset at the start of the calendar year.
- Like with other parts of the world, the price of petrol remained one of the sore spots for price rises.
- I need to hear what financial markets say and I like asking people questions,” Lowe said.
Liberal senator Dean Smith and Labor senator Deb O’Neill said they would quiz the central bank boss on the impact on households of nine consecutive rate rises—as well as the likelihood of at least two more rate rises this year. Lowe’s appearance came as CBA recorded a bumper half-year cash profit of $5.15 billion—which is a clear sign that while rate rises are hurting mortgage holders, they are a boon for the big four. The banks have come under fire in recent weeks for hiking on one type of product only—home loans—and stalling when it comes to savings accounts. The RBA governor, Philip Lowe, has defended the central bank’s string of interest rate hikes, arguingrunaway inflationposed a real threat to the Australian economy.
It’s also the first Labor Budget in almost a decade, which Chalmers said will provide “cost of living relief which is responsible, not reckless—to make life easier for Australians, without adding to inflation”. According to Australian Bureau of Statistics data released on Wednesday, the CPI rose 1.9% this December quarter. Meanwhile, Macroeconomics Advisory chief economist Stephen Anthony has attracted headlines by putting the risk of Australia falling into recession at 70%. Early in 2022, Lowe said that rates were unlikely to rise before 2024, and many people took out hefty mortgages on the back of the RBA’s conjecture. In response to the monthly CPI figure, Australian Treasurer, Jim Chalmers, said that inflation had likely peaked.
In one early sign of a slowing economy, the ABS jobs vacancy data did show that the number of roles that employers are looking to fill eased somewhat in the November quarter. Despite the strong headline figure, ANZ’s Ms Timbrell said expects this surge is the “last hurrah” as mortgage repayment hikes and rents squeeze households. This was as people cashed in on Black Friday sales, with the spending focused on clothing, shoes, furniture and electronic goods. The retail data, also for November, showed turnover rose that month by a record 1.4 per cent. “The continued strength in inflation coupled with the resilience in consumption will prompt the RBA to keep hiking rates for a while yet.” Capital Economics analyst Marcel Thieliant said borrowers can expect further rate increases this year.
The annual rate shot up to 7.3%, from 6.1%, the highest since 1990 and almost three times the pace of wage growth. “The central banks in those jurisdictions are worried and have really turned the screws. Overall, goods were still 7.6% more expensive than a year ago, a rate well down on the 9.5% clip in the final three months of last year. Diesel prices sank 10.3% for the quarter, while unleaded petrol was basically unchanged.
IMF’s chief economist, Pierre-Olivier Gourinchas, said the world was entering a “perilous phase” in which “economic growth remains low by historical standards and financial risks have risen, yet inflation has not yet decisively turned the corner”. SYDNEY, April The Australian dollar took a further knock on Wednesday while bonds extended their rally after a downward surprise in core inflation lessened the pressure for another hike in interest rates next month. Costs pressures were also building in the service sector which recorded its largest annual rise since 2008, driven by holiday travel, meals out and takeaway food. “We saw a strong labour market report, we saw a strong business survey from NAB, retail sales data was a little softer than we expected, but this monthly CPI coming in quite seasonally strong,” she said.
The RBA Trimmed Mean https://1investing.in/ jumped 6.1% yoy, the fastest pace since the series began in 2003, exceeding the midpoint of the RBA’s 2-3% target. There’s also been strong rises in grocery costs, with all food and non-food grocery items increasing in the September quarter. In the 12 months to the September quarter, fruit and vegetables prices rose 16.2% and dairy products increased 12.1%, the report reads. According to ABS figures, the most significant price rises affecting the quarterly inflation rise of 1.9% were domestic holiday travel and accommodation, up 13.3%; electricity, up 8.6%; and international holiday travel and accommodation, up 7.6%.
International Trade Price Indexes, Australia
Take away the costs of these items and inflation is actually around where the RBA would like it to be. Obviously, you can’t just remove these prices from the figures, but it does highlight inflation is not due to runaway demand off the back of cashed-up households spending like mad. And while the annual inflation of 7% in the March quarter remains well above the RBA’s target range of 2% to 3%, the figures show little reason for a rate rise next month either. The previous annual inflation rate came in at 7.3%, although today’s figure—while higher than hoped—was not totally surprising, with Treasury forecasting inflation to peak at 8% by year’s end. The figure is slightly higher than the 6.9% that analysts were predicting, but lower than the 30-year-high of 7.8% from the December quarter. The ABS also released the monthly CPI figure for March, which came in at 6.3%, a fall from the annual rises of 6.8% to February and 7.4% to January.
CPI increase by 1.8% in the September quarter alone, driven by a 10.9% rise in gas prices. The cost of building new dwellings increased by 3.7% in the quarter and furniture, up 6.6%, was another big contributor. The trimmed mean inflation figure, which strips out more volatile price movements and which the RBA looks at closely, quickened to a 6.1% annual pace from 4.9% in the June quarter. Other signs that inflation may remain uncomfortably high for the RBA include the fact service costs rose to an annual rate of 6.1% in the January-March period, or the fastest climb since since 2001.
‘We’ve seen the peak’: Falling shipping costs, reduced fruit and veggie prices push down inflation
The tracker also shows 56% of quick ratio definitionns are “somewhat stressed” about their current financial situation, and almost 1 in 5 are extremely stressed. “There’s been a very large increase in the price of vegetables, for example even a small cabbage or lettuce can go up to A$10 to A$12 dollars which is unheard of,” Chu said. The restaurant scene such as the one in Chinatown should brace for change amid rising inflation. Temporary changes in inflation may be caused by events like supply disruptions or seasonal sales, according to the RBA. It’s calculated by the Australian Bureau of Statistics, which collects prices for thousands of items.
Since September 29, the ABS has been publishing monthly, rather than just quarterly, data of inflation to give economists and politicians the most accurate, up-to-date overview of the economy. However, the quarterly figure remains the most comprehensive measure of inflation because the new monthly updates only record inflation on up to 70% of goods and services, while the quarterly figures provide a full inflationary picture of Australia. The current headline inflation rate is 6.9%, which was announced in late November as part of the new monthly CPI update. However, the quarterly annual inflation rate—viewed as the more thorough benchmark rate—was last recorded at 7.3%.
However, Sean Langcake from BIS Oxford Economics said the inflation was in line with the RBA’s most recent forecasts. Still, “we think there is enough momentum in core and services inflation to warrant tighter policy settings, and maintain our expectation for another rate hike in May”. “In contrast tradables (i.e. imported inflation) rose by just 0.3 per cent in the first quarter of 2023 and the annual rate dipped from 8.7 per cent to 6.1 per cent.” “Non tradables inflation rose by 1.9 per cent in the quarter to take the annual rate to 7.5 per cent,” he noted.
And the NAB’s Alan Oster says he expects the Reserve Bank will start cutting interest rates in February next year. “We believe this will be required to stop the unemployment rate from rising to 4.5 to 5 per cent.” “We also expect inflation to recede more quickly, which should open the door for policy easing in late 2023,” CBA’s Gareth Aird said. NAB is forecasting the unemployment rate to rise sharply to 4.7 per cent next year and 4.8 per cent in 2025.
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- Prior to today’s CPI release, investors viewed the prospect of a May rate rise by the RBA as just a 17% chance, with the next move to be a cut.
- Prices surged as much as 350%, before coming down and then rising again, data from Australia’s agriculture department showed.
- The ABS noted that fuel prices are expected to increase again in the December quarter due to the fuel excise restoration.
- Australian consumer prices have accelerated from the 5.1% recorded in the first three months, Treasurer Jim Chalmers said, intensifying pressure on households and suggesting further interest-rate increases ahead.
- The amount of large price increases across the 87 items in the CPI basket of goods and services is also falling.
“They’ve kept the prices the same, but they’ve removed grams off the packs,” Mr Risby said. “The option to swallow profit margins just isn’t really something we can tolerate or absorb comfortably.” “We expect that government payments will be around $30bn higher over the forward estimates than was forecast pre-election, because of inflation and wage expectations and how they flow through,” Chalmers said. Since taking office, the government had been forced to spend $1.6bn on additional Covid-related costs this year alone. “We know that the interest payments on government debt will be the fastest growing area of government spending – faster than the NDIS, aged care and hospital funding,” Chalmers said.
“In December, all spending categories recorded through-the-year increases, with services showing more strength than goods,” said head of business indicators at the ABS, Robert Ewing. Interestingly, Lowe conceded that unemployment would have to rise, perhaps by as much as 1%, in order to effectively tame inflation. “This marks the second consecutive month of lower annual inflation, also known as ‘disinflation’, from the peak of 8.4% in December 2022,” Marquardt said.
Australia: Inflation rate from 1987 to 2028*
Nine of the biggest 15 drivers of inflation in the first three months of this year were non-discretionary items (10 if you include tertiary education, which for some weird reason the ABS does not count as “non-discretionary”). Rents are rising ‘not because renters are flush with cash, but because housing supply issues are so deranged,’ writes Greg Jericho. “All this is happening at a time when unemployment rates are as low as they have been for many decades and household budgets are under pressure. Persistent changes in inflation, however, arise from things like a sustained increase in wage growth across the community. The national accounts show reduced level of inventory or stock, and business spending or investment is retreating. ABS Business Indicators released last month showed wages and salaries rose 2.6 per cent seasonally adjusted in the December quarter — well down from the latest Wage Price Index reading of 3.3 per cent.
Michelle Marquardt, ABS head of prices statistics, said while prices continued to rise for many goods and services, many of these increases “were smaller than in recent quarters”. The quarterly inflation figure is considered more comprehensive than the monthly update, giving a more complete picture of inflationary pressures in the Australian economy. The annual rate climbed to 7.8%, from 7.3%, the highest since 1990 and more than twice the pace of wages growth. For December alone, the CPI rose a startling 8.4% compared to the same month a year ago, up from 7.3% in November.
The annual inflation rate in Australia dropped to 7.0% in Q1 of 2023 from an over-30-year high of 7.8% in the previous period, compared with market forecasts of 6.9%. It was the lowest print since Q2 of 2022, with food prices rising the least in 3 quarters. Furthermore, cost slowed for transport (4.3% vs 8.0%), housing (9.8% vs 10.7%), furnishings (6.7% vs 8.4%), and recreation (8.6% vs 9.0%). Inflation was stable for alcohol & tobacco (at 4.4%), while prices accelerated for health (5.3% vs 3.8%) and insurance & financial services (6.5% vs 5.0%). On a quarterly basis, consumer prices went up 1.4%, the least since Q4 of 2021, mainly fueled by the growing cost of medical services, tertiary education, gas and household fuels, and domestic holiday travel.
The former Treasury secretary said he is ‘not that optimistic’ about the fight against rising prices and that the Federal Reserve lost credibility by acting too slowly. Zhang said he has been helping many restaurants restructure their businesses since the government withdrew financial support after the lockdowns ended. Most, however, say Australia can tolerate up to the top end of the Reserve Bank of Australia’s 2% to 3% target band, or just above it. Businessman Chris Lam, who runs a grocery store in Chinatown agreed that the price spike in food was particularly acute this year, and said it had started to rise quickly after Easter. For Du, the rise in prices of vegetables and raw ingredients — including those that are imported — has been particularly sharp this year. Owner Jennifer Du said she had to balance staying ahead of inflation and not raising prices too quickly for fear of alienating customers.
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For example, the annual increase in the cost of building a new house was at its lowest level since February last year, while travel and accommodation price increases had eased from summer holiday highs. “High jet fuel prices combined with strong consumer demand in November pushed airfare prices up, with accommodation prices also rising,” Ms Marquardt said. Inflation rose again in November, according to the latest Australian Bureau of Statistics figures, prompting forecasts of further interest rate hikes in 2023. A closely watched measure of core inflation, the trimmed mean, also climbed 1.8% in the quarter, lifting the annual pace to 6.1% and again far above forecasts of 5.6%.
Meanwhile, the RBA Trimmed Mean CPI added 6.6% yoy, below the consensus of 6.7%, easing from a record 6.9% increase in Q4 but remaining outside the midpoint of the central bank’s 2-3% target. The annual inflation rate in Australia climbed to 7.3% in Q3 of 2022 from 6.1% in Q2, above market forecasts of 7.0%. This was the highest print since Q2 1990, boosted by higher prices for new dwelling construction, automotive fuel, and food.
The ANZ, meanwhile, has become one of the first banks to lift its expectations of how high the RBA will raise its cash rate to quell inflation in light of the CPI data. The bank expects the RBA will lift the cash rate to 3.85%, up 25bp on its previous “terminal” rate. The ABS said electricity prices rose 3.2% for the quarter, with subsidies such as WA’s $400 power credit and smaller offerings in Queensland and the ACT helping to blunt the increase.
The 7.8% figure was slightly higher than many economists’ forecasts of around 7.5%, however, was in line with Treasury estimations that inflation would peak around 8% by the end of 2022. Sean Langcake, head of Macroeconomic Forecasting for BIS Oxford Economics, said food price inflation “was very sharp” at 3.3%. “I’m not going to pretend that we’re not worried about these electricity prices,” he told reporters, blaming the war in Ukraine for “playing havoc” with energy markets, along with what he called a decade of energy policy indecision. On the more promising side, clothing and footwear notched a 2.6% slide compared with the December quarter. Rents were a factor in that increase, with rentals in capital cities advancing at the most since 2010, reflecting strong demand and low vacancy rates, the ABS said. The cost of so-called non-discretionary items increased 7.2% in the March quarter from a year earlier, retreating from the 8.4% rate of increases in the December quarter.
Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Rates have already risen by a massive 250 basis points since May and the RBA had wanted to go slower to see how the drastic tightening was impacting consumer spending. Instead, analysts were warning that both core and headline measures were certain to spike even further this quarter with the ABS’s new monthly CPI accelerating in September.
A third leg would be efforts to “unclog and untangle our supply chains” to help quell inflation. Investments in “cleaner, cheaper more reliable energy” would also help, as would the government’s national reconstruction fund “to make us more self-reliant”. “In the year to March, real wages fell 2.7% – the worst result in more than two decades,” he said, adding that the slide will be shown to have accelerated further when June quarter wage numbers land on 17 August. By then, though, real wages will finally be growing faster than CPI, with 3.75% growth expected. Before then real wages will continue to shrink, an issue Chalmers was at pains to blame on the previous near-decade of Coalition rule.