The Consumer Price Index (CPI) rose 0.2 per cent during the September 2024 quarter, with annual inflation dropping down to 2.8 per cent from 3.8 per cent the previous quarter, the Australian Bureau of Statistics (ABS) has revealed.
This marks the first time that annual inflation has been within the Reserve Bank of Australia’s (RBA) long-sought-after target band of 2–3 per cent since the March 2021 quarter, which has been the primary objective of the central bank since it began its monetary policy tightening cycle in May 2022.
ABS head of prices statistics, Michelle Marquardt, said: “The September quarter’s rise of 0.2 per cent is the lowest outcome since the June 2020 quarter fall which occurred during the COVID-19 outbreak and was driven by free childcare.
“Annually, the September quarter’s rise of 2.8 per cent was down from 3.8 per cent in the June quarter. This is the lowest annual inflation rate since the March 2021 quarter.”
The largest contributors to the quarterly rise of 0.2 per cent were recreation and culture (1.3 per cent) and food & non-alcoholic beverages (0.6 per cent), according to the ABS.
However, price increases for other goods and services were largely offset by drops in electricity prices (down by 17.3 per cent) and fuel prices, which fell by 6.7 per cent.
Lower global demand for the price of oil saw petrol prices fall in all three months of the quarter to their lowest level since the June 2023 quarter.
“The 2024–25 Commonwealth Energy Bill Relief Fund rebates in all states and territories and state government electricity rebates in Queensland, Western Australia and Tasmania led to a large fall in electricity prices this quarter. Without the rebates, electricity prices would have increased 0.7 per cent this quarter,” Marquardt said.
Fuel and electricity prices also contributed to the slowing of annual inflation, while goods inflation (1.4 per cent) was driven by increases in tobacco and new dwellings prices.
Annual services inflation increased to 4.6 per cent during the quarter, up from 4.5 per cent in the June quarter 2024 due to higher rents, insurance, and childcare prices.
Meanwhile, the monthly CPI indicator rose 2.1 per cent to September, down from 2.7 per cent in August and 3.5 per cent in July.
The monthly CPI rise’s most significant contributors were food & non-alcoholic beverages (3.3 per cent), alcohol & tobacco (6.3 per cent), and housing at 1.6 per cent.
Reacting to the data, Westpac chief economist Luci Ellis said headline inflation came in “slightly below consensus” and the economist team’s own consensus (0.2 per cent qoq, 2.8 per cent yoy).
“A number of key categories of essentials expenditure came in below our expectations, though some key services components were a little higher than we expected, too,” Ellis said.
“The all-important trimmed mean measure came in on consensus at 0.8 per cent qoq, and 3.5 per cent yr. Both measures are significantly down from the prior quarterly readings, and the quarterly outcome (0.78 per cent to two decimal places) was just a few basis points above our [forecast]. Trend inflation is still above target, but the disinflation remains on track.”
Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said: “Although headline CPI eased as expected on energy subsidies, there were a lot of positive takeaways in the data.
“Trimmed-mean inflation eased half a percentage point to 3.5 per cent y/y, in line with high frequency indicators and should ideally help the RBA make a dovish pivot. Delaying such a pivot might get the economy socked with prolonged below par growth rate.”
Additionally, Dwyfor Evans, head of APAC macro strategy at State Street, said lower oil prices and government subsidies continue to “bias Australian inflation to the downside”; however, core prices remain “elevated relative to target”.
“The State Street PriceStats Australia series notes continued price pressures in Healthcare, Recreation, Food and elevated Insurance costs. The upshot is that the online price index for this year continues to look more like the experience of 2022 than 2023 and markedly above the 10-year average price index,” Evans said.
“Consensus expectations on Q3 disinflation cannot mask concerns that online price pressures in Australia remain persistently high relative to the RBA’s 2–3 per cent target. A cautious RBA may again indicate early 2025 for rate easing when it meets and releases its monetary policy statement on 5 November.”
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