Inflation At Three-Year Low, But Will Rate Cuts Follow?

by · channelnews

Inflation has dropped from 3.8 per cent to 2.8 per cent for the July-September period, with the consumer price index (CPI) reaching a three-year low, according to the latest figures shared by the Australian Bureau of Statistics.

The fall in inflation has given rise to renewed calls for the Reserve Bank of Australia to reconsider its position on rate cuts as it has held off on doing so for several months now, and has previously indicated that it is unlikely to cut rates for the rest of the year.

The quarterly data drop now puts inflation within the RBA’s target range of 2-3 per cent.

However, the underlying inflation rate – the trimmed mean that the Reserve Bank watches closely – came in at 3.5 per cent, and that’s the figure that the RBA is more keen on tracking.

The RBA is set to meet next week on November 5 to review the cash rate, and then again on December 10 – but analysts are pointing out that its conservative approach may mean that rates will not fall until February 2025.

Electricity prices fell by 17.3 per cent in the latest quarter, the largest quarterly fall for the index on record, the ABS said.

It comes as there has been power bill relief offered from the commonwealth and the states of Queensland, Western Australia and Tasmania.

Services inflation picked up slightly, rising at an annual pace of 4.6 per cent in the September quarter from 4.5 per cent in the June quarter. The ABS attributed higher prices for rents, insurance and child care as the main contributors to services inflation.

On a quarterly basis, the headline CPI was up 0.2 per – that increase was the least since the inflation drop in the June quarter of 2020 when Covid lockdowns began stalling the economy.

The cost of living crisis has been exacerbated by 13 interest rate hikes by the RBA since 2020, with sectors including retail and construction significantly impacted as a result of that policy.

Australia’s population also grew by 2.3 per cent to 27.1 million people in March 2024. As of March 31, the country’s population increased by 615,300 people over the previous year. Net overseas migration accounted for 83 per cent of this growth, while births and deaths, known as natural increase, made up the other 17 per cent.

Annual net overseas migration in the year to March 2024 was 509,800 people, down from a peak of 559,900 in September 2023.