Australian CPI Inflation Eases in Q3

Australian consumer price index (CPI) inflation eased in the third quarter, supported by falling electricity and fuel prices; however, underlying inflation remained above the Reserve Bank of Australia's (RBA) annual target.

Key Figures

• CPI Growth:
  • Year-on-Year: 2.8% (higher than expected 2.3%, down from 3.8% last quarter)
  • Quarter-on-Quarter: 0.2% (slightly below expectations of 0.3%, down from 1% last quarter)

Factors Impacting CPI

The decline in headline CPI was primarily driven by:
– Softer electricity prices, influenced by government programs to reduce costs.
– Falling global oil prices leading to reduced fuel costs.

According to the Australian Bureau of Statistics (ABS), while prices for most goods and services rose, those increases were offset by significant decreases in electricity and automotive fuel prices.

Underlying Inflation

Trimmed mean CPI, which excludes volatile items, grew 3.5% annually in Q3, slightly down from 3.9% the previous quarter. This figure remains above the RBA’s target range of 2% to 3%.

Outlook

Wednesday’s inflation data precedes a meeting of the RBA next week, where the central bank is expected to maintain steady interest rates and provide limited signals on future cuts.
Sticky inflation and a strong job market have led to a hawkish tone from the RBA, indicating that high-interest rates may persist longer, despite fewer hikes expected soon.