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Australia’s inflation rate slowed in November, reinforcing expectations the Reserve Bank’s key interest rate has peaked.
The headline consumer price index for the month was 4.3%, down from October’s 4.9%. It shows prices were rising at their slowest pace since the 4.0% reported in January 2022, the Australian Bureau of Statistics said on Wednesday. Economists had forecast November’s CPI to be 4.4%.
The treasurer, Jim Chalmers, welcomed the drop, while adding that inflation was “still higher than we would like”.
Labor’s policies were “helping to put downward pressure on inflation but we know that there’s more work to do because people are still under pressure”, he said.
Michelle Marquardt, the head of prices statistics at the ABS, said housing costs continued to rise, up 6.6% from a year ago, while food and non-alcoholic beverages rose 4.6%, and insurance and financial services were 8.8% more expensive.
Excluding volatile items from the monthly CPI indicator, the annual rise in November was 4.8% – lower than the annual rise of 5.1% in October, she said.
The annual trimmed mean, another inflation measure that the RBA monitors closely, also slid to 4.6%, or well down on annual rates of 5.4% and 5.3% for September and October, respectively.
The monthly headline inflation figures offer only a partial snapshot of price pressures compared with the December quarter numbers, which are due out on 31 January. But they provide more proof that inflation is continuing to wane, as intended by the RBA’s 13 increases in its cash rate since May 2022, the fastest in three decades.
In the lead-up to today’s release, investors were rating the chance of a 14th rate hike as less than 10%, according to the ASX rates tracker. Investors were fully pricing in a 25 basis-points rate cut to 4.1% as the next move by the RBA by September.
Australia’s monthly headline inflation rate peaked at 8.4% in December 2022 and has mostly trended lower since then.
The November data has a greater weighting on services compared with October. On a quarterly basis, the rate of goods price increases has been falling for a year while service inflation only started retreating in the September quarter of 2023.
The market’s initial reaction to the inflation numbers was limited. Stocks were 0.2% down for the day. The Australian dollar ticked about 0.1 US cent higher to be worth 66.95 US cents.
“My base case view remains that the quarterly CPI won’t be bad enough to lead the RBA to revise up its current inflation forecasts,” said David Bassanese, chief economist for BetaShares, adding: “Hence the RBA is likely to leave rates on hold in February – and has likely finished raising rates.”
Among housing costs, rents rose at an annual rate of 7.1% in November, faster than the 6.6% reported in October.
Without the changes to the commonwealth rent assistance from 20 September, rents would have risen 8.8% over the 12 months to November, the ABS said.
Electricity prices, too, were 10.7% higher than a year earlier, up from a year-on-year increase of 10.1% for October. Gas prices were up 12.9%, similar to the annual rate for October.
Without the government’s energy bill relief fund, the increase in power prices would have been 19% since June instead of the 8.8% increase, the ABS said.
There was better news for motorists: automotive fuel was 2.3% higher than in November, which was a much smaller increase than the 8.6% pace in October and the eye-watering 19.7% in September.
The easing of the pain at the bowser was “a significant contributor to the lower annual rise in the monthly CPI indicator over the past two months”, Marquardt said.
Meat and seafood posted one of the smallest increases, with prices up 0.2% from November 2022. Farmers and some politicians, though, have argued that retail prices for meat should be decreasing after wholesale prices fell sharply as farms started destocking towards the end of 2023.
Holiday travel and accommodation posted a 0.3% fall in prices, as did furnishing, household equipment and services, the only two groups to be cheaper than a year earlier.
Rising weather disaster costs contributed to higher insurance costs, with premiums up 16.3% in November from a year ago. That increase was the fastest since the ABS began compiling monthly CPI figures, and compared with 14.7% in October.
November retail sales figures released on Monday showed consumers spent more than expected in a month boosted by major discounting events, including Black Friday and Cyber Monday.
Turnover rose 2% for the month, better than the economists’ tip of 1.2%, although spending remained just 2.2% higher than a year earlier, which was a contraction once inflation is accounted for.
Building approvals for the month were also better than forecast, expanding 1.6% for the month alone to just over 14,500. Economists had predicted a slight fall after approvals rose 7.2% and the RBA had lifted the cash rate again that month.
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