Inflation slows in June quarter
The ABS has released inflation data for June quarter ahead of the RBA’s rate decision next week.
Australia’s consumer price index rose 0.8 per cent for the June quarter, according to data published today by the ABS, with rents, holiday travel and financial services some of the key price rises, according to the ABS.
Annual CPI inflation eased again in the June quarter with annual CPI inflation at 6.0 per cent in the June 2023 quarter.
This was lower than the 7 per cent annual rise in the March 2023 quarter.
This marks the second consecutive quarter of lower annual inflation with inflation down from its peak of 7.8 per cent in the December 2022 quarter.
Trimmed mean annual inflation of 5.9 per cent was also lower in the June quarter, compared to March 2023 quarter inflation of 6.6 per cent, and the peak in December 2022 quarter of 6.9 per cent.
Services inflation saw its largest annual rise since 2001, however, driven by higher prices in a range of services categories across rents, restaurant meals, holiday travel and insurance.
Prices continued to rise across a range of services, with annual price growth for services the highest since the introduction of the GST over 20 years ago.
Contributing to the prices rises were stronger wages growth and increased costs for utilities and rents as well rising insurance premiums across house, house contents and motor vehicle insurance.
Goods annual inflation continued to ease from 7.6 per cent in the March quarter to 5.8 per cent in the June quarter after two years of strong price increases.
Price rises for food, furniture, appliances and clothes slowed in the June quarter, while automotive fuel prices were 3.6 per cent lower compared to 12 months ago.
AMP deputy chief economist Diana Mousina said this week’s inflation data would be a prominent driver for the RBA’s decision on rates next week.
The June quarter inflation figure was below AMP’s estimates of annual growth of 6.2 per cent.It was also below the 6.3 per cent forecast by the Reserve Bank of Australia.
While inflation is now decelerating, Ms Mousina said there is still a risk that the weakening in inflation could prove to be temporary if consumer spending rises again as real wages growth rises.
“Australian 1-year inflation expectations have declined from their highs but are still around 5 per cent, well above the 2-3% inflation target,” she said.
BDO EconSearch Partner Anders Magnusson said the gradual decline in inflation was expected given the cash rate rise in June.
"We expect this trend to continue in the next few months, despite the RBA holding the cash rate in July, as the lagged effect of previous rate rises continue,” said Mr Magnusson.
“It appears that the RBA has managed to keep inflation expectations anchored, despite the ongoing high costs of living and tight labour market.
BDO expects the RBA to keep rates on hold next week following the release of CPI data today.
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