Australia's Inflation Increases To 3.8%, RBA Unlikely To Raise Interest Rates
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Australia's annual inflation rate has seen an increase from last year's 3.6% to 3.8% in June 2024.
The increase comes after a straight quarterly price rise of 1% in both the March and June quarters. This is also the first rise in the annual consumer price index (CPI) inflation since the 2022 December quarter.
The rate of inflation does not come as a surprise to economists, with the Reserve Bank of Australia (RBA) planning to meet on Monday and Tuesday to discuss the future of the interest rates, which is not expected to rise now, ABC reported.
The current cash rate is set at 4.35%. Although the overall inflation rate has slightly increased to 3.8%, the measure of core inflation, also known as the "trimmed mean," has decreased slightly to 3.9% from 4%.
"Today's CPI release confirms that inflation is as sticky as expected but, importantly, is no higher than the RBA had forecast it to be," said BDO Economics partner Anders Magnusson. "This is good news as the RBA tries to keep a lid on inflation without losing the gains made by workers through a strong labor market."
"Today's release has not changed our forecast that the next movement by the RBA will be a rate cut in early 2025. We don't believe that the RBA will raise the cash rate next week, but the ongoing cost-of-living struggles for many Australians will likely continue until early next year," he said.
The June quarter had a 1.1% quarterly and 4.5% annual increase in the cost of necessities, mostly due to increases in rent, health care, new housing, and fruits. As a result, the difference between necessary and non-essential items has grown.
Since wage growth has peaked and service inflation is predicted to drop, rate rises are unlikely even if inflation marginally exceeds the RBA's 3.8% projection. Analysts estimate that by mid-2025, inflation will have reached 2-3%.
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