Inflation falls to 4.1%, beating forecasts

The news: Australian CPI in the year to the December quarter fell to 4.1%, beating expectations of 4.3% and edging closer to the Reserve Bank's target range of 2%-3%.

The numbers: The annualised figure was down from 5.4% in the September quarter. CPI for the quarter fell to 0.6% from 1.2% in the September quarter. Services inflation, which has been sticky and causing concern for the RBA, eased to an annualised 4.6%, from 5.8% over the quarter and down from the peak of 6.3% in the June quarter 2023. Price growth was strongest in tobacco (+7.0%), new dwelling purchases by owner-occupiers (+1.5%), and domestic holiday travel and accommodation (+3.9%).

The context: The Reserve Bank will decide on the cash rate for the first time in 2024 next Tuesday and is widely tipped to hold steady at 4.35%. With inflation heading towards the central bank's target range, analysts will be looking for clues as to when it might start cutting interest rates.

What they said: “While prices continued to rise for most goods and services, annual CPI inflation has fallen from a peak of 7.8% in December 2022, to 4.1% in December 2023," said Michelle Marquardt, ABS' head of price statistics.