Inflation eases ahead of Reserve Bank interest rate call
Inflation dropped to six per cent in the June quarter ahead of a Reserve Bank interest rate decision next week.
Photo image: InDaily.
The consumer price index figure released today is also down from the 7.8 per cent inflation peak recorded in the December 2022 quarter and follows the Reserve Bank’s decision to leave interest rates on hold last month following 12 consecutive rate hikes.
Renters remain hard hit however, with prices rising by 2.5 per cent per Australian Bureau of Statistics data. Other significant price rises were felt in international travel and accommodation (up by 6.2 per cent), financial services (up by 2.5 per cent) and new home purchases by owner-occupiers (up by 1 per cent).
Adelaide recorded an annual rise of 6.9 per cent – the largest of all capital cities – though one point down on 7.9 per cent last quarter.
Credit Union SA Economist at UniSA Dr Susan Stone said South Australians could take some comfort in the national figures but acknowledged that prices remain high.
“What’s really driving it are rents, and the housing market remains strong in South Australia,” she said.
“The RBA may see that the numbers are coming down and think the momentum is still enough to curb the pressure on prices, so they may decide to wait.”
The economist warned that ‘entrenched inflation’ could soon become a problem for Australia.
“But the competing pressure is that the longer inflation stays around we get expectations built-in, and if people start expecting pieces to go up next month it’s going to influence their behaviour today,” Stone said.
“The RBA is going to be worried about entrenched inflation – that is people taking it into account in their decision-making process and if that happens that’s a nightmare to get rid of.”
ABS head of price statistics Michelle Marquardt said the quarterly rise of 0.8 per cent was the lowest since September 2021.
“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,” she said.
“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.
“Higher demand for international travel, particularly to Europe with the start of the European summer peak season, led to price increases. These were partially offset by price falls for travel to South-east Asia and New Zealand as prices dipped following increases during the Christmas and school holiday periods in December and January.”
Food prices also rose by 1.6 per cent, driven by an increase in the price of takeaway foods (up 1.7 per cent), fruit and vegetables (up by 2.4 per cent), and bread and cereal products (up by 2.9 per cent).
“A shortage of potatoes due to wet weather in key growing regions late last year has continued to place pressure on prices for potato products, including takeaway hot chips, potato crisps and frozen potato products,” Marquardt said.
“Vegetable prices rose due to some salad vegetables, like tomatoes and lettuces, coming out of season.”
Oracle Insolvency Services partner Nick Cooper said it was a “concern that Adelaide is recorded as the highest capital city”.
“The rising cost of housing for people, whether it be higher mortgage repayments or rents, has an impact on consumer discretionary spending. This is why we see restaurants and cafes hit hardest in times like these,” Cooper said.
“If you’re paying more for rent, you will cut back on eating at a restaurant on a Saturday night. You’ll bring your lunch to work rather than buy it. The more people that do this the greater the impact on local cafes and restaurants.
“The rising cost of utilities is also a burden on hospitality businesses. Owners are having to increase the price of meals to cover these higher costs or risk running into financial trouble.”
The latest figures follow new research from Roy Morgan, released yesterday, which found that 1.43 million mortgage holders were ‘at risk’ of mortgage stress in the three months to June 2023.
This represents the equal highest number of mortgage holders considered ‘at risk’ for over 15 years since there were 1.46 million ‘at risk’ in May 2008.
It also follows the release of ANZ and Roy Morgan consumer confidence data which demonstrated a rise of 2.6 points to 75.2 points this week – its highest rate since early June.
However, the consumer confidence index remains depressed, and has now spent 21 straight weeks below the mark of 80 – the longest stretch below 80 since the index began being conducted in October 2008.
Consumer confidence was down in South Australia, but up in New South Wales, Victoria, Queensland and Western Australia.
The ASX 200 is up by 0.75 per cent following the release of the ABS data.
