Housing witnesses subdued inflation

The Australian Bureau of Statistics (ABS) released its monthly consumer price index (CPI) figures. While many points of inflation saw significant increases over the year, housing was one of the few to see subsided growth.

Between October 2023 and October 2024, housing CPI climbed just 0.2 per cent. Meanwhile, overall inflation grew 2.1 per cent.

“Annual inflation was steady at 2.1 per cent in October and remains the lowest annual inflation since July 2021,” ABS head of prices statistics Michelle Marquardt said.

According to the ABS, the significant fall in electricity prices played a major role in influencing the CPI drops. Between October 2023 and October 2024, electricity CPI figures fell 35.6 per cent.

“The falls in electricity and fuel had a significant impact on the annual CPI measure this month. When prices for some items move by large amounts, measures of underlying inflation like the CPI excluding volatile items and holiday travel, and the trimmed mean can provide additional insights into how inflation is trending,” Marquardt said.

“Annual trimmed mean inflation was 3.5 per cent, up from 3.2 per cent in the previous month and similar to where it was in August. The CPI excluding volatile items and holiday travel was 2.4 per cent in the 12 months to October, down from 2.7 per cent in September.”

It’s clear the government’s National Energy Bill Relief rebate is providing some much-needed relief for Aussie families.

The other subcategories that make up housing are rents, which climbed 6.7 per cent over the year, new dwelling purchases by owner-occupiers (up 4.2 per cent), and gas and other household fuels (up 4.4 per cent).

Marquardt said: “The annual rise in rents of 6.7 per cent was partly offset by an increase in Commonwealth Rent Assistance (CRA). The maximum rate available for CRA rose by 10 per cent in September 2024 on top of the usual CPI indexation on 20 March and 20 September. Without the CRA changes, rents would have risen by 8.1 per cent in the 12 months to October.

“Commonwealth government and state government rebates continue to reduce household out-of-pocket expenses for electricity, leading to a 12.3 per cent fall in electricity prices in the month of October. This follows large falls in the previous three months since the introduction of the rebates,” she said.

How will the RBA react?

When any economic data comes through, so too do economists have their say as to whether it will influence the Reserve Bank of Australia’s cash rate call.

According to Bendigo Bank’s chief economist, David Robertson, May is the earliest we should expect a cut.

“Ahead of the last RBA meeting for 2024, the latest inflation data continues to support no change to official rates in December, but more evidence that the RBA should be cutting rates by May with the worst of the cost-of-living shock behind us.

“The 2.1 per cent annual rise in the CPI indicator for October was below consensus and maintained the same pleasingly low rate as the previous month, but was driven primarily by electricity rebates,” Robertson said.

“Underlying inflation measured by the ‘trimmed mean’ was higher at 3.5 per cent so more progress is needed on this front, with the full quarterly numbers to be released on January 29th. Markets had been expecting an RBA cut in February but have recently pared back these expectations and are now aligned to our unchanged view of the easing cycle starting in May.”

There are a variety of factors at play influencing the RBA’s decision. A major one is the election of Donald Trump. However, Robertson doesn’t believe the discussed tariffs will have an immediate impact.

“Other factors continue to add volatility to markets including Donald Trump’s latest tariff threats, but these are unlikely to influence the Australian economy or the RBA in the next six months and will most likely be a medium-term factor via our major trading partners in Asia,” he said.

“Real household disposable income is forecast to continue to recover in 2025 with tax cuts and moderating inflation providing relief, so RBA cuts from May will complement this recovery but be third in line in timing. New Zealand’s central bank cut rates by 50 basis points today to 4.25 per cent, while our forecast for May has a 35 basis point cut to 4.0 per cent to kick off the cycle.”

Related: Inflation to remain at the low end of target band

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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