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  • Writer's pictureCrest Economics

Falling Inflation- Feb 2024

 Recent data from the Bureau of Statistics highlights a significant transition in Australia’s economic landscape, specifically regarding inflation. From the September quarter, where inflation was 5.4%, annual inflation retreated to 4.1% in the December of quarter of 2023. This substantial decline marks the most significant drop since the 2020 lockdowns.

Amidst these developments, the most recent monthly CPI measures, which excludes some items with prices that do not generally change over time, such as education costs, estimates that inflation from the 2023 year only rose to approximately 3.4%. This also indicates that Australia’s inflation rate closely aligns with the US, whose inflation stands at around 3.4%.

However, the easing of inflationary pressures does not minimise the pressure on households due to wage growth stagnating. Despite anticipated wage growth, which is forecasted at 4%, the disparity between wage growth and inflation rates continues to pose as a challenge for households. Over the past 3 years, while wages have rise by 10%, prices have surged by 16.1%, leaving the average wage earner with diminished purchasing power.

Additionally, much of this inflation throughout the year was driven by a hike in the costs of non-discretionary expenses such as energy bills, food and rent. This disproportionately affects lower-income households. Coupled with the recent rate hike in November, inflation still accentuates a cost-of-living crises and pressures within the economy.

Hence, although inflationary concerns have been abated, policymakers must continue to implement monetary and fiscal measures to maintain and ensure the economic health of households.

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