Asciential Insights October 2024

In this edition

ABS Monthly Consumer Price Index Indicator
RBA Stays the Course
Inflation back in the band at last...or is it?
RBA Governor Michele Bullock under pressure
Australian financial markets forecast 4 interest rate cuts from February 2025
Proptrack Home Price Index results - September 2024
Off the property track...

ABS CPI Indicator

Here are the key points from the Monthly Consumer Price Index (CPI) Indicator for August 2024:

Overall Inflation: The monthly CPI indicator rose 2.7% in the 12 months to August 2024.
Significant Price Changes: Notable increases were seen in Housing (+2.6%), Food and non-alcoholic beverages (+3.4%), and Alcohol and tobacco (+6.6%)1, Transport costs decreased by 1.1%.
Electricity Prices: Electricity prices fell by 17.9% due to the Commonwealth Energy Bill Relief Fund and State rebates.
Automotive Fuel: Prices for automotive fuel dropped by 7.6% compared to August 2023.

RBA Stays the course

From the editor's desk at TUD a perspective on the RBA and interest rates.

Here are the key points from the article:

RBA Decision: The Reserve Bank of Australia (RBA) decided to keep the cash rate unchanged at 4.35% in September 2024.
Economic Indicators: Factors influencing this decision include moderating inflation, steady job growth, and slowing wages growth.
Future Outlook: Economists predict that the RBA may not cut rates until early 2025, despite ongoing pressures from households and businesses.

Inflation back in the band at last... or is it?

From The Conversation this week "A closely watched measure of Australian inflation dived in the month of August, plunging from 3.5% in July to just 2.7%".

The 2.7% is a "headline" inflation rate and has been widely reported in the media in this past week (e.g. ABC and Reuters). It is not a true indicator, however, because it has been skewed by the Commonwealth Energy Bill Relief fund rebates, and a reduction in fuel prices this past month.

The Conversation rightly reports the RBA Governor's comments that she is paying more attention to the "underlying" or "trimmed mean" inflation rate which "looks through temporary measures such as subsidies".

Still good news though

That said, Michelle Marquardt (ABS head of prices statistics) said this week that the trimmed mean inflation, which excluded last month's big falls in electricity and fuel prices, still managed to decline from 3.8% to 3.4% - which is the lowest reading in 2½ years.

Inflation IS approaching the RBA's target band of 2-3%. Accordingly, rate cuts are expected (see our next article below).

Australian financial markets forecast 4 interest

rate cuts from February 2025

Finally, some good news on interest rates. The latest RBA Rate Tracker results indicate that Australian financial markets are expecting four cuts to the cash rate in the next 12 months - with the first expected in February 2025.