Inflation eased to 4.9 per cent in the 12 months to July, according to the latest monthly consumer price index (CPI) indicator from the Australian Bureau of Statistics (ABS).
The indicator, released before Philip Lowe’s final meeting as Reserve Bank of Australia (RBA) governor next Tuesday, was below market expectations for an annual rise of 5.2 per cent.
“This month’s annual increase of 4.9 per cent is down from 5.4 per cent in June. Annual price rises continue to ease from the peak of 8.4 per cent in December 2022,” said ABS head of prices statistics Michelle Marquardt.
The most significant contributors to the annual increase in July were housing (+7.3 per cent) and food and non-alcoholic beverages (+5.6 per cent), while price falls for automotive fuel (-7.6 per cent) and fruit and vegetables (-5.4 per cent) drove down the annual increase.
“CPI inflation is often impacted by items with volatile price changes like automotive fuel, fruit and vegetables, and holiday travel,” Ms Marquardt noted.
“It can be helpful to exclude these items from the headline CPI indicator to provide a view of underlying inflation. When excluding these volatile items, the decline in annual inflation is more modest at 5.8 per cent in July, compared to 6.1 per cent in June.”
Three of Australia’s big four banks had predicted that the indicator would fall below 5 per cent during July, with NAB correctly predicting the annual increase of 4.9 per cent.
“The CPI indicator does not capture the full basket in any given month, and the month of July is heavily to goods, meaning the indicator will get all the benefit of any goods disinflation and little of the read from still-high services inflation,” NAB economist Taylor Nugent said.
The consumer price index (CPI) lifted 0.8 per cent in the June quarter, below the market’s expectation for a 1.0 per cent quarterly rise and lower than the forecasts of most economists.
“Inflation had fallen further and been a little lower than expected in the June quarter,” the RBA said.
“However, members observed that there had not yet been any material slowing in services price inflation, and the experience globally had been that services price inflation was more persistent than expected.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
