- Inflation rate stands at 2.1 percent in Australia
- A drop in electricity and fuel is attributed to a drop
Australia’s inflation rate remains at the lower end of the Reserve Bank of Australia’s (RBA) target range and has been below market expectations.
The monthly consumer price index (CPI) fell to a three-year low in the 12 months to October 2024, according to the latest data from the Australian Bureau of Statistics, standing at 2.1 per cent, stable since September .
Annual CPI inflation has fallen from 3.8 percent in June to 2.1 percent in October due, in part, to significant price declines in electricity and auto fuel.
Electricity fell 35.6 percent in the 12 months through October, which is the largest annual drop in the electricity series ever recorded in the CPI. Auto fuel prices fell 11.5 percent in the past 12 months after repeated price declines in recent months.
However, in bad news for mortgage holders, the trimmed annual average inflation rate, which the RBA pays attention to when determining the cash rate, increased.
The trimmed annual average inflation, which excludes volatile items such as electricity and fuel, was 3.5 percent, up from 3.2 percent the previous month and similar to August.
“The falls in electricity and fuel had a significant impact on this month’s annual CPI,” said ABS head of price statistics Michelle Marquardt.
“When prices for some items vary widely, core inflation measures such as the CPI excluding volatile items and vacation travel, and the trimmed mean can provide additional information on the inflation trend.”
Australia’s inflation rate remains at the lower end of the Reserve Bank of Australia’s (RBA) target range and has been below market expectations.
The main contributors to the annual movement at the group level were food and non-alcoholic beverages, which increased 3.3 percent.
Recreation and culture rose 4.3 per cent, and alcohol and tobacco cost consumers 6.0 per cent more in the 12 months to October.
The October data follows September’s quarterly update which showed inflation had fallen to the central bank’s target range of between 2 and 3 percent since March 2021.
According to the bank’s monetary policy minutes published in November, the RBA may need to see more than one “good” quarterly inflation report to consider an easing of policy.
This means mortgage holders may have to wait until May 2025.
While inflation has fallen sharply over the past year, falling from a high of 7.8 per cent to 2.8 per cent in the September 2024 quarter, the RBA said core inflation remained too high, and Staff forecasts predicted a sustainable return to target in 2026.
A Reuters poll released before the data was released had predicted the gauge would rise 2.3 percent in the 12 months through October, up from 2.1 percent in September.
CBA senior economist Stephen Wu was slightly more optimistic in his prediction saying the big four banks expected the monthly gauge to register annual headline inflation of 2.1 percent in October, near the bottom of the bank’s target range. Reserve Bank of Australia (RBA) from 2 to 3 percent.
The economist predicted this would be led by a drop in rents, electricity and hotel travel.