Australia's inflation data and Reserve Bank rate decision outlook
Consensus Summary
Australia’s inflation data for June showed headline inflation easing to 3.8% in the year to June, down from 4%, reducing the likelihood of a Reserve Bank rate hike on 11 August. Both sources agree underlying inflation remained steady at 3.6%, with fuel prices falling 10.9% in June due to Middle East stabilisation. Economists are divided on whether the RBA will hold rates, with some suggesting a final hike in November to 4.6%, the highest in 15 years, while others believe rates will stay on hold. The Guardian highlights homebuilding costs rising 5.8% in three years and notes service sector inflation remains a concern, while ABC emphasizes persistent underlying inflation and risks from global oil prices and housing costs. Despite the decline in headline inflation, underlying pressures and service inflation suggest the RBA may remain cautious about further easing.
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Key details reported by multiple sources:
- Headline inflation eased to 3.8% in the year to June, down from 4% in the year to May
- Underlying inflation remained at 3.6% in June, unchanged from May
- Fuel prices fell 10.9% in June due to Middle East stabilisation
- The Reserve Bank’s next rate decision is scheduled for 11 August
- Homebuilding costs rose 5.8% in the year to June, the fastest pace in three years
- Headline inflation was 4.6% in March
- Underlying inflation was 3.5% in June quarter, down from 3.8% forecast by the RBA
- The RBA’s preferred underlying measure rose 0.8% in the June quarter
- Inflation in goods slowed from 5.5% in March to 3.5% in June
- Services inflation rose from 3.6% in March to 4% in June
Points of Difference
Details reported by only one source:
- Chris Richardson, an independent economist, declared 'bullet now officially dodged' regarding the RBA’s rate decision
- The RBA’s preferred measure of underlying inflation was softer than anticipated at 0.8% in the June quarter, lifting the annual pace to 3.6% from 3.5%
- The trend of falling fuel prices in June will reverse in July due to the restart of the Iran war
- Stephen Smith, a partner at Deloitte Access Economics, said households and businesses will breathe a collective sigh of relief but noted red flags in service sector inflation
- The RBA’s rate hikes were starting to work in the fight against inflation, and the Middle East war had not been as bad for inflation as feared
- The federal government's fuel excise relief measures contributed to lower automotive fuel prices in April and May
- Citi economists Josh Williamson and Faraz Syed suggested a possible final rate hike in November, raising the cash rate from 4.35% to 4.6%
- EY chief economist Cherelle Murphy said the RBA could lift rates to 4.6%, the highest in 15 years, despite the decline in headline inflation
- Westpac chief economist Luci Ellis said she no longer expects the RBA to hike rates this year
- The Monetary Policy Board meeting is on 10 and 11 August, with much resting on refreshed Reserve Bank staff economic forecasts
- The RBA’s tightening bias remains, with 'rates on hold with a tightening bias' still the view of Bendigo Bank chief economist David Robertson
- The Bureau of Statistics showed inflation in tradables slowed from 5.5% in March to 3.5% in June, while non-tradables rose from 3.6% to 4%
Contradictions
Conflicting information between sources:
- The Guardian states inflation eased to 3.8% in the year to June from 4%, while ABC notes the same but also mentions it was 4.6% in March, implying a different trajectory
- The Guardian says the RBA’s preferred measure of underlying inflation was 0.8% in the June quarter, while ABC does not explicitly state this figure but confirms underlying inflation was unchanged at 3.6%
- ABC mentions the RBA’s cash rate could rise to 4.6% in November, the highest in 15 years, while the Guardian does not mention this specific timeline or rate
- The Guardian implies the RBA is unlikely to raise rates on 11 August, while ABC suggests it is a close call and some economists still expect a hike
- The Guardian attributes the June fuel price drop to Middle East stabilisation, while ABC also mentions this but adds the federal government’s fuel excise relief measures contributed to lower prices in April and May
Source Articles
‘Dodged a bullet’: inflation eases to 3.8%, reducing chances of interest rate rise for Australia’s mortgage holders
ABS data shows inflation still too high but tracking lower than anticipated Australian mortgage-holders have “dodged a bullet’, with the Reserve Bank now less likely to hike rates next month after new data showed inflation unexpectedly eased to 3.8%, in the year to June, from 4%. The hotly anticipated consumer price report from the Australian Bureau of Statistics had been seen by some economists as a “make-or-break” moment ahead of the RBA’s upcoming rate decision on 11 August. Continue reading.
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