This article is from the Australian Property Journal archive
AUSTRALIA’S annual headline inflation rate has fallen below 3% for the first time in three and a half years, but the data is unlikely to encourage the Reserve Bank of Australia to reduce interest rates this year.
According to the latest Australian Bureau of Statistics data, the consumer price index (CPI) rose 0.2% in the September 2024 quarter and 2.8% annually. The quarterly rise is the lowest since the June 2020 quarter.
The contributing factor was the extended and expanded Commonwealth Energy Bill Relief Fund rebates, and the introduction of State government rebates, applied from July 2024, which had the effect of reducing electricity costs in the September 2024 quarter. Excluding the rebates, CPI rose by 0.8% during the quarter and 3.5% annually. Of concern, services inflation rose in the September quarter, from 4.5% to 4.6% annually.
ABS Consumer Price Index, Australia – annual movement
| Month | Quarterly CPI results | Monthly CPI indicator |
| Dec-22 – peak | 7.8% | 8.4% |
| Jan-23 | 7.5% | |
| Feb-23 | 6.8% | |
| Mar-23 | 7.0% | 6.3% |
| Apr-23 | 6.7% | |
| May-23 | 5.5% | |
| Jun-23 | 6.0% | 5.4% |
| Jul-23 | 4.9% | |
| Aug-23 | 5.2% | |
| Sep-23 | 5.4% | 5.6% |
| Oct-23 | 4.9% | |
| Nov-23 | 4.3% | |
| Dec-23 | 4.1% | 3.4% |
| Jan-24 | 3.4% | |
| Feb-24 | 3.4% | |
| Mar-24 | 3.6% | 3.5% |
| Apr-24 | 3.6% | |
| May-24 | 4.0% | |
| Jun-24 | 3.8% | 3.8% |
| Jul-24 | 3.5% | |
| Aug-24 | 2.7% | |
| Sep-24 | 2.8% | 2.1% |
Source: ABS Consumer Price Index, Australia, Quarterly CPI and Monthly CPI indicator, annual change (%).
In light of the new data, Australia’s largest lender, the Commonwealth Bank joined the other big three banks in pushing back its cash rate forecast, from December this year to February 2025.
As a result, the Big Four now expect the first cut will be in February 2025 with the total number of cuts ranging from three to five.
| Potential impact of cash rate forecasts | ||
| Cash rate forecast | Potential change in monthly repayments
$600k loan |
|
| ANZ | 3 x 0.25% cuts starting Feb-25 | -$270 |
| CBA | 4 x 0.25% cuts starting Feb-25 | -$357 |
| NAB | 5 x 0.25% cuts starting Feb-25 | -$442 |
| Westpac | 4 x 0.25% cuts starting Feb-25 | -$357 |
| Source: www.canstar.com.au – 30/10/2024. Repayments based on an owner-occupier paying principal and interest on the average variable rate of 6.35% (RBA) with a $600k loan over 25 years. Assumes banks pass cuts on in full the following month. | ||
Canstar’s data insights director Sally Tindall said any hope of a cash rate cut in 2024 is now well and truly dead in the water.
“While headline inflation is now officially in the RBA’s target band, this number is largely based on smoke and mirrors created by temporary electricity rebates and volatile petrol prices.
“Factors the RBA has said it will look beyond,” she added.
“Trimmed mean inflation, which is the RBA’s preferred measure, is still too far out of striking distance for the Board to change tack, particularly with services inflation moving in the wrong direction.
“Meanwhile services inflation is proving to be difficult to shift with a small rise this quarter from 4.5% to 4.6%. This alone is too high for the RBA to change strategy,” said Tindall.
