Inflationary pressures eased slightly in October, as many economists had forecast, following a poor result in September and data for the September quarter. However, the improvement is not a cause for great excitement and will not lead the Reserve Bank to change its stance on the risks of "sticky" inflation, heightened expectations, and potential interest rate hikes.
According to the Australian Bureau of Statistics, the monthly indicator, which only tracks around 70% of items and products in the Consumer Price Index, slowed to a 4.9% increase last month, down from 5.6% in September and 8.4% at the end of 2022. The headline rate was lower than the 5.4% in the September quarter, while the core measure in the indicator slowed to 5.1% from 5.5% the previous month and 5.2% in the quarterly data.
Despite the modest improvement in the core measure, it is not directly comparable to the quarterly basket and measures. The Reserve Bank of Australia (RBA) is expected to use this data to maintain pressure through continued warnings of potential rate hikes.
Leigh Merrington, acting ABS head of prices statistics, noted that the most significant contributors to the October annual increase were Housing (up 6.1%), Food and non-alcoholic beverages (+5.3%, due to higher prices for melons and bananas), and Transport (up 5.9%, despite falling oil and petrol prices).
The ABS reported that the annual increase for Housing of 6.1% was lower than the 7.2% in September. New dwelling prices rose by 4.7%, marking the lowest annual rise since August 2021, as building material price increases continued to ease, reflecting improved supply conditions.
Rents increased by 6.6% in the 12 months to October due to low vacancy rates and a tight rental market. However, this was down from the 7.6% increase in September, largely due to the increase in Commonwealth Rent Assistance that took effect from 20 September 2023 and reduced rents for eligible tenants.
Excluding the changes to rent assistance, rents would have increased by 8.3% in the 12 months to October, according to Mr. Merrington.
Electricity prices rose by 10.1% in the year to October, reflecting increases in wholesale prices from annual price reviews in July 2023. Price rises were partially offset by the introduction of Energy Bill Relief Fund rebates for eligible households from July.
"Electricity prices have risen by 8.4% since June 2023. Excluding the rebates, electricity prices would have increased by 18.8% over this period," Mr. Merrington said.
Automotive fuel prices were 8.6% higher in October compared to 12 months ago, primarily due to higher global oil prices. This is down from the annual increase of 19.7% in September.
"The reinstatement of the full fuel excise tax to 46 cents per litre on 30 September 2022 contributed to the annual increase up to September 2023 but not in October 2023. This, combined with a monthly fall of 2.9%, has reduced the annual rise for automotive fuel," Mr. Merrington explained.
