The Reserve Bank is unlikely to make any hasty decisions during its upcoming meeting next week, despite a mixed bag of news from the August consumer inflation report. According to data released by the Australian Bureau of Statistics on Wednesday, annual headline consumer prices rose by 5.2%, up from July’s 4.9% – marking the first increase in four months.
The not-so-good news can be attributed to expected rises in housing costs, petrol prices (after a dip in July), and travel expenses. However, core inflation saw a slight decrease, falling to 5.5% from July’s 5.8%, after excluding volatile price changes for petrol, diesel, fruit, vegetables, and holiday travel.
Most economists had anticipated a headline rate above 5% and a marginal decrease in the core rate, aligning with the RBA’s expectations.
The upcoming meeting, set for next Tuesday, will be the first for the new governor, Michelle Bullock. Contrary to the Australian Financial Review’s claim that the CPI update was a ‘brutal’ reminder for the central bank’s new leader, the latest data should not come as a surprise.
The August annual increase in headline inflation was primarily driven by housing (6.6%), transport (petrol, up 7.4%), food and non-alcoholic beverages (up 4.4%), and insurance and financial services (8.8%, due to higher premiums).
Automotive fuel prices surged by 13.9% year-on-year in August, reversing the 7.6% decline seen the previous month.
While housing increased by 6.6% annually, it was slightly lower than July’s 7.3% rate. New dwelling prices also saw a modest annual growth rate of 4.8%, the lowest in two years.
Rent prices rose by 7.8% over the 12 months leading up to August, up from 7.6% in July, reflecting the tight rental market conditions.
Electricity prices climbed by 12.7%, and gas prices surged by 12.9% in the 12 months ending in August, primarily driven by wholesale price increases. The impact of electricity price hikes for eligible households was mitigated by rebates from the Energy Bill Relief Fund, introduced in most cities from July.
Food and non-alcoholic beverage prices increased by 4.4% in the 12 months to August, down from the 5.6% annual increase in July. This represents the lowest annual increase since February 2022.
Michelle Marquardt, the ABS’s head of price statistics, noted, “Food inflation continues to ease, although differences remain across food categories. Prices for bread and cereal products and dairy products have risen by over 10% in the past 12 months, while fruit and vegetable prices are 8.3% lower compared to 12 months ago due to improved growing conditions.”