Reporter's view: Inflation downward trajectory in the bag
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Reporter’s view: Economics correspondent Jennifer Duke writes: "This is another reminder we are in the 'last mile' of the inflation fight. At the end of last year, inflation was up 0.6% over the December quarter in the smallest three-month rise since March 2021.
"It is worth remembering though that this newer monthly dataset, which was introduced in October 2022 as the cost of living crisis entered full swing, is not as comprehensive as that quarterly read and tends to be more volatile.
"There was also an annual re-weighting of the 'basket of goods' that makes up CPI, which has an effect. The biggest increases were in the weighting of recreation and culture, transport and health.
"The biggest decreases were in alcohol and tobacco, furnishings and household goods, and housing (on the back of reduced numbers of new dwellings, but moderated by higher rents). No surprises that housing remains the biggest spend in the “basket” though, followed by food and non-alcoholic drinks.
"That being said, this is the first indication of where inflation is heading in 2024 and it’s a good sign. And given the RBA board meets next to decide on rates on 18 and 19 March, before a full quarter’s worth of data is released, the monthly indicators have a bit more significance.
"Treasurer Jim Chalmers shared a media statement last night ahead of the latest official data, saying inflation is moderating but it’s 'not mission accomplished'."
Inflation falling faster than expected
The news: The January monthly consumer price index shows annual inflation is on the way down, coming in at the lowest level since November 2021.
The numbers: CPI increased 3.4% in the year to January, which was below economist expectations of about 3.6%. The top categories were housing up 4.6%, food and non-alcoholic beverages up 4.4%, and alcohol and tobacco up 6.7%.
Looking more closely at the housing category, rent was a particular pain point up 7.4% over the 12 months. Electricity prices were up 0.8%, helped by rebates. Without them electricity would have been up over 15%. The annual trimmed mean inflation was up 3.8% in January compared to 4% in December last year.
The context: The rate of inflation is a major focus for the government and the Reserve Bank of Australia at the moment and this is a highly uncertain period.
Markets have been pricing in earlier rates than the RBA which suggests investors and economists have much more certainty that the inflation fight is nearly over.
This data is an indication that inflation is coming down and perhaps faster than some policymakers and commentators were expecting.
What they said: “Annual inflation when excluding volatile items has been declining since the peak of 7.2 per cent in December 2022,” Michelle Marquardt, ABS head of prices statistics said.
The source: ABS
