Due to the fact that consumer spending was poor in October, the Reserve Bank of Australia is less likely to impose another interest rate increase on the economy. As a result, the inflation rate in Australia has significantly decreased.
A report revealed that the consumer price index increased at a rate of 4.9% on an annual basis in the month of September, compared to a rate of 5.6% in September alone. Inflation was forecast to come in at 5.2%, according to economists.
An increase of 6.1% in the cost of housing was one of the major movers, along with an increase of 5.9% in the cost of transportation and a 5.3% increase in the cost of food and beverages that do not contain alcohol. With the assistance of the government, rentals and electricity prices were able to be brought under control.
According to Westpac, the Consumer Price Index (CPI) fell by 0.3% in October as compared to the previous month. Westpac had also predicted that the CPI would climb by 0.2%. During the month, rents decreased by 0.4%, but the cost of traveling during the holidays decreased by 7%.
When Reserve Bank of Australia (RBA) board will gather for its meeting of year to discuss interest rates, the data for inflation will be the last important numbers that they will have to take into consideration.
The Consumer Price Index (CPI) numbers include a period that occurred prior to the interest rate increase that was implemented by the central bank this month, which was the thirteenth increase in a year and a half. Due to the fact that the monthly survey only covers around 70 percent of the total goods and services, the quarterly data are given more weight than the monthly survey results.
Michele Bullock, the governor of the Reserve Bank of Australia, has issued a warning that “homegrown” inflation may be more persistent than anticipated. On Tuesday, she made a statement that suggested Reserve Bank of Australia (RBA) could be willing to delay any additional rate hikes for the time being. The meeting was held in Hong Kong.
According to what Bullock said during the conference, “We are currently in a period where we need to be a little bit careful.”
“We want to make sure that we keep inflation under control and that we bring it back down to our band of [2% to 3%],” she said. “However, we must also make certain that we do that in a manner that does not impose an excessive amount of burden on the economy and does not significantly increase the rate of unemployment.”
Following yesterday’s ABS retail sales results, which showed a surprisingly little decrease in turnover of 0.2% over the course of the previous month, David Bassanese, the chief economist at BetaShares, stated that the mild inflation figures followed shortly after.
As a result, “in the span of two days, we have received reassuring news that both consumer spending and inflation continue to ease,” he added. “This should eliminate the need for the Reserve Bank of Australia to dampen Christmas cheer with another rate increase next week.”
According to Leigh Merrington, the acting head of pricing statistics for the Australian Bureau of Statistics, a Consumer Price Index (CPI) gauge that does not include volatile products came in at 5.1% for the month of October, which is a decrease from 5.5% in September. After reaching 5.4% in September, the so-called trimmed mean measure dropped down to 5.3% in the most recent month.
It is possible that the market’s reaction was rather ambiguous, despite the fact that the headline CPI figure shocked on the negative. This could be due to the following set of figures. When the day came to a close, the Australian dollar was hovering around the 66.5 US cent mark, and the stock market finished the day approximately 0.3% higher or with little change from the position before the release.
In October, rents were 6.6% more than they were a year earlier; nevertheless, this increase was lower than the annual pace of 7.8% in August and 7.6% in September as compared to the previous month. When compared to the previous year, the overall cost of housing was 6.1% higher.
A significant increase in Commonwealth rent assistance went into effect on September 20. According to Merrington, the annual rate rise would have been 8.3% if it had not been for this increase.
Gas and other household fuels also saw an increase of 13%, which is a rise from the 12.7% increase seen in September.
Although there was a 10.1% increase in the cost of electricity, the annual rate had decreased from 18% in September for the most part. According to Merrington, the increase in the cost of electricity would have been 18.8 percent higher if the energy bill reduction fund had not been used.
Although the price of gasoline for automobiles was 8.6% higher than it was in October 2022, the rate of rise appears to have calmed down from the 19.7% rate that was recorded in September.
According to Merrington, “the reinstatement of the full fuel excise tax to 46 cents per litre on September 30, 2022 contributed to the annual increase to September 2023 but did not contribute to the increase to October 2023.” The annual increase in the price of motor fuel has been lowered as a result of this, in addition to a monthly decrease of 2.9%.
Following increases of 4.4% in August and 4.7% in September, the price of food and beverages increased by 5.3% in the most recent month compared to the same month a year ago. This represents a downward trend.