Australia’s inflation has returned to the Reserve Bank of Australia’s (RBA) target range of 2-3% for the first time since March 2021, driven by a substantial drop in energy and fuel prices. The Australian Bureau of Statistics (ABS) announced that the Consumer Price Index (CPI) rose by only 0.2% in the September 2024 quarter, bringing annual inflation down to 2.8%, from 3.8% in June.
Despite the milestone, a rate cut remains unlikely in the immediate term. Core inflation, measured by the trimmed mean, fell to 3.5% annually, indicating persistent underlying pressures, particularly in service sectors like rent and childcare. ABS head of prices statistics Michelle Marquardt noted, “The September quarter’s rise of 0.2% is the lowest since June 2020, primarily due to government energy rebates.” Without these rebates, electricity prices would have increased by 0.7%.
Key contributors to easing inflation included a record 17.3% quarterly drop in electricity prices and a 6.7% decrease in automotive fuel, as government interventions and lower global oil prices took effect. However, services inflation ticked up slightly to 4.6%, with rising costs in insurance, rental housing, and childcare.
Jim Chalmers, the federal treasurer, highlighted that the fall in core inflation shows broader economic relief beyond just government rebates. “Our energy rebates are helping, but underlying pressures in the economy are easing considerably,” Chalmers remarked.
Economists remain divided on the RBA’s next steps. While Deloitte’s Stephen Smith argued the data bolsters a case for rate cuts, others caution the RBA may wait until core inflation trends more sustainably within the target range. Currently, markets are pricing a modest chance of an interest rate cut by early next year, though February or May 2025 is seen as more probable.
