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The latest data from the Australian Bureau of Statistics’ (ABS) monthly Consumer Price Index (CPI) indicator rose 5.2 per cent in the 12 months to August 2023, up from the 4.9 per cent recorded in July 2023.
However, annual trimmed mean inflation remained steady at 5.6 per cent, in line with the rise of 5.6 per cent recorded in July.
Prior to the release of the data, economists and the market widely expected the CPI indicator to increase above 5 per cent for the month due to factors such as persistently high services inflation and petrol prices.
Insurance (including house insurance) and financial services - which refers to indirect charges recouped by intermediaries and direct charges levied for services including withdrawals, maintenance of accounts and arranging loans - (8.8 per cent), transport (7.4 per cent), housing (6.6 per cent), and food and non-alcoholic beverages (4.4 per cent) recorded the largest price rises for the month excluding volatile items such as fruit and vegetables, automotive fuel, and holiday travel and accommodation.
The annual increase for housing dropped from the 7.3 per cent increase recorded in July.
The data further revealed that new dwelling prices rose 4.8 per cent in the 12 months to August, as building material increases continued to ease, reflecting improved supply conditions, the ABS revealed. This annual rise for new dwellings marked the lowest recording since August 2021.
Rent prices continued an upward trajectory, rising by 7.8 per cent during this period, up from 7.6 per cent in July that further indicated strong demand for rental properties and a tight rental market.
ANZ senior economist Adelaide Timbrell said although the CPI indicator reaccelerated in August, it was still the second-lowest result since early 2022.
“The recent headline monthly CPI outcomes suggest a touch of upside risk to our current 1.0 per cent quarter-on-quarter estimate for the 3Q CPI (headline), although not enough risk to warrant the RBA hiking rates in October,” Ms Timbrell added.
CreditorWatch chief economist Anneke Thompson said while the higher figure of 5.2 per cent will “not be welcome news for borrowers”, it was largely impacted by the higher cost of fuel during the month.
“Residential rents, fuel and insurance pricing continue to gain momentum. For the business community, rising insurance will have a big impact, and add to already significant cost pressures many businesses are facing,” Ms Thompson stated.
“The construction sector, in particular, is very reliant on insurance, and while price growth momentum in building materials is slowing, rising insurance premiums will be the next headache the industry will face.”
Westpac senior economist Justin Smirk said the major bank is in the process of revising its CPI forecast “in light of this data including the critical update of the quarterly services prices”.
In Westpac’s CPI preview, Mr Smirk noted some upside risk to the major bank’s current 3Q CPI forecast of 0.9 per cent (quarter) and 5.1 per cent (yearly) should the monthly indicator print as it was expected by the market.
Commonwealth Bank of Australia economist Stephen Wu said this month’s figures have given them “an updated read on the quarterly pulse of the market services inflation” that is typically only measured once per quarter.
“Market services inflation is typically most sensitive to increases in labour costs. The RBA is concerned about a wage-price spiral occurring in Australia,” Mr Wu added.
“We view the uptick in inflation in August as a temporary hump in the downward trend in train since December last year.
“We think the RBA will be inclined to see it that way too when it meets next Tuesday for the October rate decision. We don’t anticipate the August CPI will alter their view the current cash rate of 4.1 per cent is restrictive enough to pull inflation back inside the target band.”
[RELATED: Monthly CPI expected to return above 5%: Economists]
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