Today’s CPI release shows inflation eased down on an annual basis from 6 percent in the June quarter to 5.4 percent in the September quarter – but this was above market expectations and represents an upwards move on a quarterly basis – a rise from 0.8 percent to 1.2 percent. The core, ‘trimmed mean’ measure fell, however from 5.9 percent annually in the last quarter to 5.2 percent.

Petrol prices were the largest contributor to inflation over the quarter, with Automotive fuel rising by 7.2 percent. This was the largest quarterly rise since March 2022 and was due to higher global oil prices.

Rents also rose strongly (+2.2 percent) across all capital cities reflecting strong demand and low vacancy rate.

Another major contributor was electricity (+4.2 percent). This was despite the recent energy bills relief package.

New dwelling purchases by owner-occupiers rose by 1.3 percent, although the pace of growth in new dwelling prices continues to slow down this quarter due to lower new demand and easing of material costs.

Price falls were observed across a few categories, including childcare – like energy, this also benefited from government intervention in the firm of the recent subsidy increase. Price reductions were also seen in vegetables, and domestic holiday travel and accommodation, which offset the price increases in most goods and services.

Overall, goods inflation declined from 5.8 percent in the June quarter to 4.9 percent in the September quarter, with smaller price increases for food, furniture and housing. Services inflation eased for the first time since December 2021 due to price falls for holiday travel and accommodation and lower costs for childcare.

Discretionary goods and services inflation rose 5 percent year-on-year this quarter, slower than the 5.5 percent growth in the June quarter, reflecting households adjusting discretionary spending due to cost-of-living pressures. Non-discretionary goods and services inflation also slowed to 5.5 percent from 6.1 percent.

Tradable and non-tradable inflation both fell, with tradable inflation decreasing from 4.4 percent to 3.7 percent, and non-tradable inflation decreasing from 6.9 percent to 6.2 percent.

The inflation trend in Australia is similar to that observed in several other advanced economies.

The data represents mixed signals for the RBA. Had it not been for twin government interventions in the form of the increase in childcare subsidy and energy bill relief the figures would have been higher. But on the other hand, core inflation fell by 0.7 percent over the quarter and the monthly figures shows core inflation falling in the September month. Mortgage rates are still rising from bond yields so the RBA doesn’t necessarily need the cash rate to rise to get interest rate hikes through the economy. I think it is a real line-ball judgement next month and could go either way although the new governor does seem to have been preparing the market for a rise. 

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Ian Welch
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