Inflation Eases in Australia, But Concerns Remain
Australia's annual inflation rate has fallen to 2.8%, down from 3.8% mid-year, marking the lowest rate in three and a half years. This slight decline is lower than expected and offers some relief to consumers facing rising costs.
The Australian Bureau of Statistics (ABS) reported a 0.2% price increase in the September quarter, compared to the 1% rise in the June quarter. This is the lowest quarterly increase since the June 2020 quarter, which was impacted by the COVID-19 pandemic and free childcare initiatives.
While prices for most goods and services continued to rise, these increases were offset by significant falls in petrol and power prices. Global oil price declines and government rebates across states and territories contributed to these drops.
Goods inflation fell from 3.2% annually to 1.4%, driven by lower electricity and fuel prices. However, services inflation rose slightly to 4.6% annually, mainly due to higher rents, insurance, and childcare costs.
The trimmed mean, a measure of underlying inflation, fell to 3.5% annually, down from 4% the previous quarter. This aligns with market forecasts.
The Reserve Bank expects the headline annual inflation rate to fall to 3% by the end of 2024, but the trimmed mean is expected to remain above the 2-3% target band at 3.5%.
While the inflation rate is declining, concerns remain about persistent service sector inflation. This makes a rate cut this year unlikely, according to economists.
The ABS data also highlights the impact of rising costs on households. Adrianna, a nurse in Melbourne, shared her experience of feeling the pressure of higher prices and increased mortgage repayments.
Food price inflation remained at 3.3% annually, with fruit and vegetable prices rising significantly due to unfavorable growing conditions. The cost of eating out and takeaways also increased, along with meat and seafood prices.
Businesses like Jonathan Rowatt's bar and bowling alley in Melbourne have faced numerous price increases from suppliers, particularly smaller players. They have had to balance these rising costs with the cost of living pressures felt by their customers.
Out-of-pocket childcare costs rose 3.2% in the quarter, up more than 12% over the year. Rent prices also increased by 1.6% in the quarter, contributing to a 6.7% annual increase.
While growth in advertised rents has eased back in recent months, the rental market remains a significant concern, particularly in some areas like Perth. Increasing housing supply is seen as key to alleviating stress in the rental market.
Overall, the easing of inflation offers some relief, but concerns remain about persistent service sector inflation and the impact of rising costs on households. The rental market also continues to be a challenge, highlighting the need for increased housing supply.