Australia’s Inflation Eases to 2.8 Percent Amid Falling Fuel and Power Costs

A woman shops in the fresh produce section of a supermarket in Albany, Western Australia, on Oct. 15, 2024. Susan Mortimer/The Epoch Times

Australia’s inflation rate has slowed to 2.8 percent, its lowest point since March 2021, returning to the Reserve Bank of Australia’s (RBA) target range for the first time in three years.

Data from the Australian Bureau of Statistics (ABS) showed that consumer price index (CPI) inflation dropped from 3.8 percent in June, a slowdown attributed to government-backed rebates and lower automotive fuel prices.

Trimmed mean inflation, which omits volatile prices, was still above target at 3.5 percent, emphasising the underlying inflationary pressures in essential services.

When trimmed mean inflation is above the target (in this case, it’s at 3.5 percent rather than the RBA’s target of 2-3 percent), it signals that prices for essential goods and services are still rising steadily.

This means that, even though overall inflation has eased somewhat, costs in core areas like healthcare and housing are still putting pressure on households, suggesting that inflationary pressures haven’t fully subsided.

The deceleration in inflation may come as a relief to households facing persistent cost-of-living pressures, but this alone is unlikely to prompt a pre-Christmas interest rate cut from the RBA.

RBA is expected to hold a meeting to discuss the interest rates next week and may continue to focus on the impact of underlying price pressures in services and essential goods.

Rebates Drive Energy Prices Down

The 2024-25 Commonwealth Energy Bill Relief Fund rebates, alongside state government rebates in Queensland, Western Australia, and Tasmania, significantly reduced household electricity bills in the September quarter.

According to ABS data, electricity prices fell by 17.3 percent in the quarter and 15.8 percent over the past 12 months. These rebates included Queensland’s $1,000 Cost of Living rebate, Western Australia’s $400 energy rebate, and Tasmania’s $250 Renewable Energy Dividend payment.

“Without these rebates, electricity prices would have risen by 0.7 percent,” the ABS reported.

Automotive fuel prices also contributed to easing inflation, down 6.2 percent year-over-year as global demand for oil declined. Average unleaded petrol prices fell to $1.84 per litre, marking a 13-cent drop from September 2023 levels.

Services and Food Inflation Remain High

Despite the overall drop in inflation, prices for services continued to rise, reaching an annual rate of 4.6 percent, driven by increasing costs in rents, insurance, medical care, and education.

Rental inflation eased slightly to 6.7 percent in the September quarter, moderated by recent adjustments to Commonwealth Rent Assistance.

Excluding these adjustments, rental inflation would have been 8.5 percent over the year, reflecting a persistently tight rental market and low vacancy rates.

Food prices, too, remained elevated at 3.3 percent over the past year, with significant increases in fruit and vegetable costs. Factors included adverse weather impacting berry and tomato yields and ongoing global challenges, such as a cocoa shortage driving up chocolate prices.

Egg prices were also 9.1 percent higher due to supply constraints from an ongoing bird flu outbreak.

IMF Warning to Australia

According to the latest IMF report released last week, Australia is poised to record an inflation rate of 3.6 percent by the end of 2025, with only Slovakia expected to experience higher inflation among developed nations. This sharp forecast comes as inflation eases in many other countries, underscoring Australia’s economic challenges.

However, it acknowledged that Australia’s approach has been more measured, opting for less aggressive monetary tightening than nations like the United States to preserve employment levels.