The latest data from the Australian Bureau of Statistics (ABS) shows that inflation has eased to 4.1 per cent in the year to the December quarter 2023, down from 5.4 per cent in the previous quarter. This is the lowest annual inflation rate since the December quarter 2021, when it was 3.8 per cent.
The ABS also reported that the monthly inflation rate, which measures the change in prices over a 12-month period, fell to 3.4 per cent in December 2023, down from 4.3 per cent in November. This is the first time since December 2021 that the monthly inflation rate has been below 4 per cent.
The government welcomed the news and claimed that its policies were helping to bring down inflation and ease the cost of living pressures for households.
The government was making progress and delivering results
Prime Minister Anthony Albanese said that the inflation challenge was not over yet, but the government was making progress and delivering results.”Today’s welcome results are even better than the median market expectation. They show that we are on the right track and that our cost of living plan is working,” he said.
He added that the government’s policies had directly reduced inflation by 0.5 percentage points in the year to the December quarter 2023.Minister cited the government’s energy plan, which had lowered electricity prices by 12 percentage points, and its rent assistance scheme, which had reduced rent increases by 1.6 percentage points.
He said that these measures were helping to ease the burden on households, especially low- and middle-income earners, who were facing higher costs for essentials such as food, transport and health care.
Minister also said that the government was committed to supporting economic growth and job creation, which would help to boost incomes and living standards.
He said that the government’s fiscal strategy was prudent and responsible, and that it would maintain a balanced budget over the medium term.He said that the government would continue to monitor inflation closely and take appropriate action if needed.He urged the Reserve Bank of Australia (RBA) to keep interest rates low and support the economic recovery.
The RBA has kept its official cash rate at a record low of 0.1 per cent since November 2020, but has signalled that it may start to raise rates in late 2024 or early 2025, depending on inflation and employment outcomes.The ABS data showed that inflation increased by 0.6 per cent in the December quarter 2023, compared to a rise of 0.8 per cent in the September quarter.
Annual inflation figures were affected by base effects
The main contributors to the quarterly increase were food and non-alcoholic beverages (up 1.2 per cent), transport (up 1.1 per cent) and health (up 0.9 per cent).The main offsetting factors were clothing and footwear (down 1.2 per cent), communication (down 0.7 per cent) and recreation and culture (down 0.6 per cent).
The ABS said that some of the price movements in the quarter were influenced by seasonal factors, such as fruit and vegetable prices, as well as supply chain disruptions caused by COVID-19 outbreaks and lockdowns.
The ABS also said that some of the annual inflation figures were affected by base effects, which reflect the comparison with unusually low or high prices in the same period a year ago.
For example, petrol prices rose by 28.9 per cent in the year to the December quarter 2023, but this was partly due to a sharp fall in petrol prices in late 2021 and early 2022, when global oil demand collapsed due to the pandemic.
Similarly, childcare prices fell by 7.7 per cent in the year to the December quarter 2023, but this was largely due to a temporary free childcare policy implemented by the previous government in mid-2020.The ABS said that these base effects would fade over time and have less impact on future inflation outcomes.