Australia’s Inflation Rises to 3.8 Percent Annually in June 2024 Quarter

Shoppers flock to Pitt Street Mall in Sydney, Australia, on Dec. 26, 2022. Roni Bintang/Getty Images

Australia’s headline inflation has regained its growth momentum in the last three months, but economists predict no interest rate hike in August.

The latest data from the Australian Bureau of Statistics (ABS) showed that the consumer price index (CPI) rose by 3.8 percent in the 12 months to the June 2024 quarter, up from 3.6 percent in the March 2024 quarter.

This follows five consecutive quarterly CPI drops from the peak of 7.8 percent in the December 2022 quarter.

Within the June 2024 quarter, inflation increased by 1.0 percent, mirroring the rise in the previous three months.

The main contributors to inflation growth in the June quarter included housing (up 1.1 percent), food and non-alcoholic beverages (up 1.2 percent), and transport (up 4.6 percent).

The ABS reported that the rise in housing prices was driven by rents (up 2.0 percent) and new dwellings purchased by owner-occupiers (up 1.1 percent).

“The continuing tight rental market and low vacancy rates caused rental prices to go up 2.0 percent for the quarter, following a 2.1 percent rise in the March 2024 quarter,” ABS head of prices statistics Michelle Marquardt said.

Meanwhile, the uptick in food and non-alcoholic beverage prices was driven by price growth in several product categories, including fruit and vegetables (up 6.3 percent), meals out and take away food (up 0.6 percent), and meat and seafood (up 1.3 percent).

“Fruit and vegetable prices rose this quarter as unfavourable growing conditions drove higher prices for grapes, strawberries, blueberries, tomatoes, and capsicums,” Marquardt said.

“This was the highest quarterly rise for fruit and vegetables since 2016.”

Annual electricity prices rose by 6 percent in the June quarter, up from 2.0 percent in the March quarter.

The ABS said electricity prices would have risen further without the government’s energy bill rebates.

“Most eligible households continued to receive the Energy Bill Relief Fund rebate in the June quarter. Excluding the rebates, electricity prices would have increased by 14.6 percent annually,” Marquardt said.

Despite the increase in headline inflation, trimmed mean annual inflation, which excludes volatile items, dropped from 4.0 percent to 3.9 percent in the quarter.

Treasurer Says Rise in Headline Inflation Not Surprising

While Treasure Jim Chalmers acknowledged the increase in the headline inflation in the June quarter, he said it was not surprising given what was happening around the world.

“Inflation is lingering for longer than we had hoped across the globe, and Australia’s experience is no different,” he told reporters.

“Global shipping, geopolitical tensions, and spikes in oil prices are adding volatility and uncertainty to the outlook for inflation across the globe.

“Our headline inflation peaked lower and later than many comparable economies, and our core inflation has moderated faster than in the US, Canada, and Euro areas.”

The treasurer also noted that inflation could “zig and zag” on the way down, as seen in other economies.

At the same time, Chalmers emphasised that the underlying inflation rate of 3.9 percent was lower than the 5.0 percent the Labor government inherited from the previous Coalition government and marked the sixth consecutive quarter of lower annual trimmed mean inflation.

“Homegrown inflation, which can be measured by non-tradable inflation, was 0.7 percent in the quarter. This is around half the rate of the March quarter 2024,” he said.

Australian Treasurer Jim Chalmers MP during post-budget media interviews at Parliament House in Canberra, Australia, on May 15, 2024. Tracey Nearmy/Getty Images

Chalmers also claimed that the June quarter inflation results were not driven by the federal budget while touting the economic achievements under the Labor government.

“Our Budget strategy is helping the fight against inflation, not hampering it,” he said.

“We have delivered the first back-to-back surpluses in almost two decades, which the RBA Governor has said are helping in the fight against inflation.

“We’re also on track for a larger than forecast surplus, which could be the largest back-to-back surpluses on record.”

Meanwhile, Shadow Treasurer Angus Taylor said the current inflation situation was the result of Labor’s economic policies.

“Australians are feeling enormous pain right now, not because of the RBA or global factors, but because of Labor’s homegrown inflation,” he said on social media.

“No matter how Labor tries to spin it, the reality is the government’s bad economic policies are to blame.”

No Case for Another Interest Rate Hike

Following the latest inflation data, a number of economists have predicted that the Reserve Bank of Australia (RBA) will not lift the official cash rate at its next meeting.

Shane Oliver, the chief economist at financial services company AMP, said the June results were not as bad as feared.

“Aust June qtr inflation in line with mkt & RBA expectations at 3.8 percent year over year with goods and services inflation edging up slightly,” he wrote on social media.

“Trimmed mean inflation fell to 3.9 percent year over year from 4 percent, which is less than expected and less than feared.

“No case for a rate hike here, esp with qtrly real retail sales down again.”

Similarly, BetaShares Chief Economist David Bassanese believed the trimmed mean inflation rate was good enough to rule out another interest rate increase in August.