AUSTRALIA has hit a bump on the road to disinflation but there are promising signs housing affordability challenges are easing.
The Reserve Bank of Australia’s preferred measure of underlying inflation – the trimmed mean – rose 10 basis points to 2.8 per cent in January, the Australian Bureau of Statistics reported last week.
Crucially though, the cost of renting and building houses continued to slow.
Rents rose at 0.3 per cent for the month, well down from the 0.7 per cent pace a year earlier, while price growth for new dwellings was down to 2 per cent annually, the lowest level since June 2021.
NAB economists said the figures backed up their view underlying inflation would fall to 2.8 per cent annually when the more influential quarterly figure is released at the end of April, paving the way for another RBA rate cut in May.
“Overall, the better inflation narrative (relative to the RBA’s forecasts) remains on track,” NAB head of market economics Tapas Strickland said.
The more volatile headline inflation rate held steady at 2.5 per cent – the midpoint of the Reserve Bank’s target range.
It broke a streak of two successive rises in the consumer price index from its 2.1 per cent low in September and October 2024.
The largest contributors to annual price growth were food and non-alcoholic beverages, housing and alcohol and tobacco, ABS head of prices statistics Michelle Marquardt said.
The result was below the consensus expectations of analysts, who had pencilled in CPI to edge up to 2.6 per cent, given the roll off of electricity rebates for some customers in Queensland.
“The impact of the rebates was lower in January than December as some households had exhausted the full value of the rebate,” Ms Marquardt said.
Treasurer Jim Chalmers said the figures were a reminder of Australia’s “substantial and sustained progress in the fight against inflation”.
“This is the first time in almost four years that headline inflation has been below 3 per cent for six consecutive months,” he said in a joint statement with Finance Minister Katy Gallagher.
“Under Labor, inflation is down, wages are up, unemployment is low and now interest rates have started to come down as well.”
But Shadow Treasurer Angus Taylor said the figures showed Australians were still suffering.
A hawkish RBA governor Michele Bullock said the battle against inflation was not yet won and more progress was needed.
