The latest consumer confidence survey from ANZ and Roy Morgan has revealed that Australians now expect inflation to reach 5.1 per cent over the next two years.
The weekly inflation expectations reading reached its highest level since December 2014, after a rise of 0.1 percentage point while the four-week moving average stands at 4.9 per cent.
Aussies have progressively raised their expectations for inflation over the past year from a reading of 3.8 per cent in early March and an average of 4.2 per cent throughout 2021.
“With petrol prices at record highs during the past few weeks, the lift in inflation expectations is not surprising,” commented ANZ head of Australian economics David Plank.
In contrast, the Reserve Bank has outlined its expectations for inflation to reach a peak of 3.75 per cent by June this year before subsequently dropping to 3.25 per cent in December and holding at 2.75 per cent from June 2023 through to June 2024.
Meanwhile, measures of consumer confidence were found to have dipped in the past week.
“Consumer confidence dropped 1.4 per cent despite the easing of COVID restrictions in NSW and the imminent reopening of international borders to tourists,” said Mr Plank.
“The expectations of higher inflation might have had a dampening effect on overall sentiment.”
Among the states, NSW suffered the largest consumer confidence decline of 5.6 per cent while Victoria was the only state to record an uptick after a rise of 2.9 per cent.
The measure of current economic conditions was found to have slipped 2.5 per cent after surging 9.3 per cent higher during the previous week while the future economic conditions measure moved down 1.1 per cent.
Only 15 per cent of respondents said they expect good times for the Australian economy over the next year compared to 21 per cent who anticipate bad times ahead.
Smaller changes were seen in the measures of current financial conditions, which moved up 0.2 per cent, and future financial conditions, which decreased by 1.1 per cent.
Additionally, the “time to buy a major household item” measure declined by 2.6 per cent with an equal proportion of Aussies saying now is a good time to buy and a bad time to buy.
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.
