Reporter's view: Economists mixed on inflation data
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Reporter's view: Economists are all over the place on what the latest data means for rates.
Most notably, though, was ANZ’s analysis two hours after the data landed. The bank’s economists think the weak data “raises the probability of a February rate cut”.
RSM Australia economist Devika Shivadekar also said in a statement that while the data paints a mixed picture for the central bank, with some price pressures remaining, a “cut will most likely be on the table at the February meeting”.
On the other side of the spectrum is EY senior economist Paula Gadsby, who said that lacklustre productivity growth, resilience in the labour market and strong government spending “could keep inflation elevated”.
“This likely points to the Reserve Bank Board keeping the cash rate at 4.35% through the first quarter of this year, and possibly later,” she said.
Moody’s Analytics is among those warning that the strong jobs market may well leave the RBA board wary of moving too early. Its analysts are tipping the first cut for May.
However, as AMP deputy chief economist Diana Mousina notes, wages growth is slowing and some are interpreting this to mean the jobs market is less of a barrier than others expect for a near-term rate cut.
Job vacancy data, also released on Wednesday, showed the first rise in over two years.
HSBC chief economist Paul Bloxham said there is a risk the jobs market is “no longer loosening, but is instead tightening” and that makes the final inflation fight all the more complicated for the RBA.
Bloxham’s central case is for a cut in the second quarter of this year, but he thinks there’s a one-in-four chance of no cuts at all in 2025. ANZ also pointed out the resilience in the labour market as a “key consideration”.
There's still some critical data to be released before the RBA meets in February. Whether that will make the picture clearer, or murkier, remains to be seen.
Monthly CPI increases 2.3% in year to November
The news: The monthly CPI indicator increased 2.3% in the year to November, up from 2.1% in the year to October. This was slightly above average forecasts of 2.2% to 2.3%.
The critical annual trimmed mean was 3.2% in the year to November, compared to 3.5% in the prior month.
The numbers: Food and non-alcoholic drinks prices were up 2.9%, alcohol and tobacco jumped 6.7% and recreation and culture increased 3.2%.
Electricity declined 21.5% and automotive fuel declined 10.2%.
Rents increased 6.6%, compared to 6.7% in October's data. Fruit and vegetable prices were up 6%.
CPI excluding volatile items and holiday travel was up 2.8% in the year to November, compared to 2.4% in the prior month. Electricity prices made up the bulk of the increase.
The context: The Reserve Bank began changing its tone in its December meeting minutes, with some interpreting the messaging as a signal the central bank is open to near-term rate cuts.
The RBA meets for the first time in 2025 in February and economists have been waiting for inflation data to firm up their predictions for when the first cut will materialise. The more crucial quarterly dataset is due at the end of January.
What they said: "Annual CPI inflation has risen since last month, in part due to the timing of electricity rebates. In some states and territories, households received two rebate payments in October in lieu of not receiving a payment in July. From November most households received one payment," said ABS head of prices statistics Michelle Marquardt.
"Electricity rebates lower the price of electricity for households. The impact of the rebates was lower in November than October due to the timing of payments.
"Most quarterly electricity bills received in November included only one instalment of the Commonwealth Energy Bill Relief Fund, whereas many bills received in October included two instalments. As a result, electricity prices rose 22.4% in the month of November."
In October, there was a 35.6% fall in electricity prices.
The source: Australian Bureau of Statistics
