As Australian retailers and consumers get ready for the Black Friday sales this weekend, they’ll need to contend with the fact that the latest inflation figures show that there likely won’t be any easing off on the cost of living crisis or a reduction in interest rates in the immediate future.
The consumer price index indicator increased 2.1 per cent in October from a year earlier, according to data from the Australian Bureau of Statistics (ABS).
Although that figure remained below economists’ estimate of a 2.3 per cent increase, the core inflation figure – the measure which smooths out volatile items – rose from 3.2 per cent to 3.5 per cent.
It is the core inflation figures that the Reserve Bank of Australia (RBA) tracks to determine whether it should cut bank rates.
The core inflation figure remains outside the 2-3 per cent target range that the RBA wants to see it at in order to consider rate cuts.
“The falls in electricity and fuel had a significant impact on the annual CPI measure this month,” said Michelle Marquardt, ABS head of prices statistics.
The RBA has kept the rates unchanged at 4.35 per cent since last November. Although it will meet in December, analysts do not expect the RBA to change rates for the remainder of the year.
The Reserve Bank has been cautious not to read too much into each monthly inflation report. Governor Michelle Bullock recently noted that the monthly inflation gauge is “quite volatile,” doesn’t capture all items and can be influenced by one-off or temporary factors.
The reason that it keeps an eye on core inflation is because it wants to see a systemic change rather than a one-off reduction in inflation before it reduces rates.
According to the inflation figures for October released by the ABS on Wednesday, top contributors were food and non-alcoholic beverages, up 3.3 per cent; recreation and culture increased 4.3 per cent; and alcohol and tobacco grew 6 per cent.
The 6.7 per cent annual rise in rents was partly offset by increased government support. Electricity fell 35.6 per cent due to the combined impact of national and state government energy rebates. New dwelling prices, which capture new builds and major renovations, increased 4.2 per cent.
