Australia’s mortgage holders received positive news as the latest inflation figures showed a decline, raising expectations that the Reserve Bank of Australia (RBA) may refrain from increasing interest rates next month. According to the Australian Bureau of Statistics (ABS), the consumer price index (CPI) decreased to 3.4 percent in November, down from 3.8 percent in October. This drop surpassed economists’ expectations, who had forecasted a reduction to 3.6 percent.
Despite this encouraging trend, concerns linger regarding ongoing price pressures. The RBA closely monitors the trimmed mean inflation rate, which removes volatile items to provide a clearer picture of underlying inflation. The trimmed mean fell from 3.3 percent to 3.2 percent, remaining above the RBA’s target range of 2 to 3 percent.
The decline in headline inflation was influenced by the conclusion of energy rebates in regions like Queensland, where electricity prices surged 19.7 percent over the year ending in November. However, the RBA tends to focus on persistent factors, such as housing costs and service prices. New dwelling prices, for example, increased by 2.8 percent in the year leading up to November, a notable rise from 1.7 percent in the previous month, although rent growth slowed slightly from 4.2 percent to 4 percent.
The RBA is set to meet on February 3 to determine its next steps regarding interest rates. Given the relative novelty of the ABS’s monthly inflation measure, which still has some seasonal adjustments to navigate, the central bank will likely await the December quarter inflation report, scheduled for release in late January, before making a decision.
Despite the recent decline in inflation, some economic analysts argue that interest rates still need to be adjusted. Warren Hogan, chief economic adviser at Judo Bank, expressed concerns about the current rate, stating, “There’s less than a quarter of the CPI basket that is below the RBA’s target band.” He added, “The reality is over the last six months, the economy is improving and inflation is rising, so this rate they have is probably not appropriate. I think they should raise rates in February.”
As Australian mortgage holders await the RBA’s decision, the recent inflation data provides a glimmer of hope for those concerned about rising interest rates. It remains to be seen how the central bank will balance these economic pressures in the coming months.
