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  • Writer's pictureCrest Economics

War on inflation is far from over- Apr 2024

Latest inflation data for the March quarter has come in higher than expected at 1.0%, dimming hopes of a late year interest rate cut. CPI data from the Australian Bureau of Statistics showed prices rose above the predicted 0.8% quarterly rise, leaving the annual rate at 3.6%. Although inflation has moderated from its peak of 7.8% in 2022, the data release has reduced the likelihood of the RBA cutting interest rates later in the year.

ABS data showed that service inflation is the main culprit holding back the progress against easing inflation. Insurance premiums lifted by 16.4% annually, making it the strongest annual increase in 23 years. Education costs rose by 5.9%, health costs up 2.8% in the quarter. The quarterly rise in housing was driven by rent advancing 2.1%, lifting the annual rise to 7.8% as the fastest pace in 15 years amid low vacancy rates. Electricity prices fell by 1.7% in the 3 months, reversing a 1.4% rise in the previous quarter. Without government rebates, the annual rise would have been 17.0%.

The Reserve Bank will likely revise their estimates of 3.3% headline inflation by mid-year from their February statement, with many investors rating a 25 basis point reduction early next year. As Jim Chalmers finalises the Federal Budget, he reiterates that the upcoming budget will seek to balance the ongoing fight against inflation with the need to gear the economy for growth, with a focus on reasonable cost-of-living relief measures.

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