While the Reserve Bank Australia (RBA) board considers another rate increase next week, prices are lifting at their slowest quarterly amount in almost two years, and inflation has slowed down a bit from 7% in March 2023 to 6% this June.
Quarterly figures also highlighted a positive slowing of consumer price growth by 0.8% compared to 1.4% in the year’s first quarter, according to the Australian Bureau of Statistics (ABS).
Instead of decreasing, annual growth in the cost of services has accelerated to 2.5%, the highest since 1988, which ABS says is partially due to rent inflation. Further, ABS said the year-on-year rental price rise was 6.7%, which is the biggest jump since 2009.
Australian Labor Party Treasurer Jim Chalmers said he understands many homes are “under the pump” from the increasingly high cost of living but that government officials are “making progress in this fight against inflation.”
Australians are not only being tasked to absorb inflation and housing costs, but are also dealing with the increase in streaming services and now swiftly mounting insurance costs from 8.8% to more than 14% currently.
Attempting to put a positive spin on some of the bad news, ABS head of prices statistics Michelle Marquardt shared there were some positives. She said, “While prices continued to rise for most goods and services, there were some offsetting price falls this quarter including for domestic holiday travel, and accommodation and automotive fuel.”
“Rents recorded the strongest quarterly rise since 1988, reflecting low vacancy rates amid a tight rental market. Rental price growth for flats continued to outpace the growth for houses,” Marquardt added.
As measured by the trimmed mean and is the RBA’s most desired measure of price pressures, underlying inflation dipped to 5.9% for the first half of the year, down from 6.6%.
“A large part of the inflation story in Australia was always on the supply side, as has been the case in similar countries around the world. And the remaining challenges on inflation are also on the supply side, around housing and energy,” said Deloitte Access Economics partner Stephen Smith.
Urged the RBA to halt rate spikes, Smith asserted that the softer-than-predicted consumer price report had “brought into focus the fact that the Reserve Bank has lifted rates too far over the past 12 months”.
Indicating the RBA will need to address ways to slow growth, borrowing cost and cost of living pressures continue to mount despite June being another stellar job growth month.
Of the current economic market, ANZ economist Madeline Dunk said, “Many households are tightening their belts as interest payments and inflation squeeze some cash flows”.
“The spending slowdown suggests monetary policy is getting real traction,” Dunk said.
Next Tuesday, the fate of interest rates will be decided when the RBA gathers.
