The monthly Consumer Price Index (CPI) indicator has reported a 2.7 percent increase in the 12 months leading up to August 2024, according to the latest figures released by the Australian Bureau of Statistics (ABS).
Michelle Marquardt, the ABS head of prices statistics, stated that annual inflation was recorded at 2.7 percent in August, a decrease from 3.5 percent in July, marking the lowest rate since August 2021.
Key contributors to the annual inflation rate included Housing, which rose by 2.6 percent, Food and non-alcoholic beverages, which increased by 3.4 percent, and Alcohol and tobacco, which saw a 6.6 percent rise. This was somewhat offset by a decline in Transport, which fell by 1.1 percent.
Significant drops in automotive fuel and electricity prices played a crucial role in moderating the annual inflation rate in August. Automotive fuel prices decreased by 7.6 percent compared to August 2023, following a series of price declines in recent months. Electricity prices also experienced a record annual fall of 17.9 percent, largely attributed to the combined effects of the Commonwealth Energy Bill Relief Fund and various state government rebates in Queensland, Western Australia, and Tasmania.
Marquardt noted, “The falls in electricity and fuel had a significant impact on the annual CPI measure this month. When prices for certain items fluctuate dramatically, alternative measures of underlying inflation, such as the CPI excluding automotive fuel, fruit and vegetables, and holiday travel, can offer additional insights into inflation trends.”
The CPI inflation rate, excluding volatile items and holiday travel, stood at 3.0 percent in August, down from 3.7 percent in July. The annual Trimmed mean inflation rate, which excludes both the declines in automotive fuel and electricity along with other major price changes, was recorded at 3.4 percent in August, compared to 3.8 percent in July.
“Both measures of annual underlying inflation in August are the lowest they have been for 2.5 years,” Marquardt added.
In the housing sector, prices rose by 2.6 percent over the year to August 2024, a decline from 4.0 percent in July. Although electricity prices fell significantly, increases in rents and new dwelling prices were also observed. Rents surged by 6.8 percent year-on-year, reflecting tight rental markets in most capital cities. Meanwhile, new dwelling prices, which account for new constructions and major renovations, increased by 5.1 percent, consistent with rising costs for labor and materials.
Marquardt explained that electricity prices dropped 17.9 percent in the 12 months to August, marking the largest annual decline since the data series began in the early 1980s. “Commonwealth and state government rebates led to a 14.6 percent fall in electricity prices for August, following a 6.4 percent drop in July. Without these rebates, electricity prices would have risen by 0.1 percent in August and 0.9 percent in July,” she noted.
In terms of automotive fuel, prices were down by 7.6 percent compared to August 2023, reversing an annual increase of 4.0 percent in July. The average monthly price for unleaded petrol in August 2023 was $2.00 per litre, while it fell to $1.85 per litre in August 2024.
Annual inflation for food and non-alcoholic beverages stood at 3.4 percent in August, down from 3.8 percent in July. The most significant contributor to the rise in food prices was fruit and vegetables, which surged by 9.6 percent in the 12 months to August, compared to a 7.5 percent increase in July. Higher prices for strawberries, grapes, broccoli, and cucumbers drove the annual rise in fruit and vegetable prices to the highest level since December 2022.
CreditorWatch comments, Anneke Thompson, Chief Economist said: “As expected, today’s monthly CPI data measuring the price movements of goods and services over August 2024 revealed a large downward shift in inflation. This was expected given both state and federal government electricity subsidies were reflected in the cost of electricity, and there was also a large expected fall in the price of automotive fuel. The best measure to look at in today’s data is the trimmed mean, which fell on an annual basis from 3.8 per cent in July 2024 to 3.4 per cent. While still outside the RBA’s target range, it is moving in the right direction and at a consistent pace.
“Of more concern is continued sticky inflation in the areas of health, insurance, education and new dwelling purchases. Rent inflation is still high, however, indications are that rent increases have stabilised across most of the country. But this stabilisation will take some time to be reflected in the ABS’s data. Overall, this result provides no surprises – on the upside or downside – to the RBA, and is unlikely to shift its thinking around the timing of the first cut to the cash rate. Given household consumption is likely to stay very subdued for the remainder of the year, it is likely that trimmed mean monthly inflation will continue its slow trend down over the next few months.”
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