Australia’s cost of living crisis showed signs of easing in the June quarter, with headline inflation coming in as expected.
The cost of living continued to climb in the June quarter, with inflation ticking up to 3.8 per cent annually, the Australian Bureau of Statistics reported today.
This marks the first increase in annual inflation since December 2022, according to ABS head of prices statistics, Michelle Marquardt. The quarterly rise of 1.0 per cent mirrored the previous quarter’s increase.
However, a deeper dive into the data reveals a less optimistic picture. While overall price rises moderated, core inflation remained stubbornly high, indicating persistent price pressures in the economy.
As consumers tighten their belts amid rising living costs, retail spending has softened, raising concerns about the broader economic outlook.
Housing costs were a key driver, with rents surging 2.0 per cent for the quarter. Food prices also climbed, particularly for fruit and vegetables, as unfavourable growing conditions pushed up costs.
While the overall inflation rate eased slightly from its peak, underlying measures remained elevated, indicating persistent price pressures.
CreditorWatch Chief Economist Anneke Thompson said today’s CPI figures would offer some relief to the Reserve Bank of Australia (RBA) board. While trimmed mean inflation – which strips out volatile items – fell slightly from 4.0% to 3.9%, underlying inflationary pressures remain strong.
“”Today’s June quarter CPI number will be somewhat of a relief for the Reserve Bank of Australia (RBA) board, as the number came in at about what was expected. Trimmed mean inflation fell slightly, from 4.0 per cent in the March quarter to 3.9 per cent.
“This measure removed volatile items and highlights just how much inflation is being impacted by volatile items. This quarter, fruit and vegetable prices rose not due to overheating demand, but to poor weather impacting growing conditions. One of the surprise increases in prices was in clothing and footwear, where prices had moderated substantially due to lower demand and discounting among retailers. However, the ABS pointed out that the increase was largely due to new winter stock coming in to stores over the quarter that isn’t yet discounted.
“Retail Trade for the month of June was also released today, and is very helpful to read in conjunction with the CPI figure, particularly given that quarterly retail volume data was also released. While retail prices rose, particularly in household goods, other retailing and department stores, this was largely due to consumers spending money while end of financial year sales were on.
“Retail volumes, on the other hand, continued to fall. Volumes have fallen for six of the past seven quarters. Retail volumes on a per capita basis have also fallen for eight straight quarters. Population growth appears to be impacting inflation on the services side, where new migrants are demanding things like rental accommodation, healthcare, education and utilities.
“Interestingly, growth in cafes, restaurant and takeaway food services was flat, which reflects the extremely difficult operating conditions the food and beverage sector is operating in. This contributes to CreditorWatch’s forecast that business failures in the café and restaurant sector will increase from already very high levels over the next year.
“Overall, today’s data is unlikely to convince the RBA Board that another rise to the cash rate is warranted. Demand from consumers has very clearly tightened for some time now, and volatile items are the main contributor to those higher-than-expected monthly CPI releases. While the RBA would certainly like to see faster progress being made on the fight against inflation, another increase to the cash rate is unlikely to achieve this, given that households and businesses that would pull back on spending due to higher interest rates have already done this.”
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