Inflation, GDP dip below market expectations
The Australian Bureau of Statistics (ABS) has released its latest monthly consumer price index (CPI) data, reporting annualised inflation of 7.4% in January — well below market expectations of 8.1%.
This represented a 1% decline on the previous month, in which annualised inflation grew 8.4%.
Despite falling below expectations, the January result was still the second highest monthly increase reported by the ABS since it commenced reporting in September 2018.
According to Michelle Marquardt, ABS head of prices statistics, the largest driver of the monthly result were housing costs, which grew 9.8% over the 12 months to January 2023.
“The key contributors to this change were new dwellings and rents. In monthly terms, both new dwelling (0.5%) and rents (0.7%) prices rose,” she observed.
“However, rents are growing more strongly than they were 12 months ago while the increases in New dwelling prices are moderating compared to a year ago.”
Despite easing, recreation and culture costs also remained notably high (10.2%) in the 12 months to January 2023, along with food and non-alcoholic beverages (8.2%).
The release of ABS’ monthly CPI data coincided with newly reported GDP data, which revealed aggregate economic activity slowed to 0.5% over the fourth quarter of 2022 — below market expectations of 0.8%.
The December quarter result took annualised GDP growth to 2.7%.
Sean Langcake, head of macroeconomic forecasting at Oxford Economics, attributed the quarterly slowdown to “re-opening impulse fading and tighter monetary policy”.
He added the GDP result could suggest “Australia’s inflation problem is solved”.
Langcake continued: “Domestic price inflation slowed slightly in Q4 (aided by the resolution of supply disruptions), but the pace of price growth remains concerning.
“The growth outlook for 2023 is challenging, with growth set to slow further as the economy works against brisk inflation and higher interest rates.”
Despite subdued inflation and GDP data, the Reserve Bank of Australia (RBA) was expected to continue pursuing its monetary policy tightening strategy.
The RBA was expected to action at least one more hike to the cash rate over the coming months.
Three of Australia’s four major banks projected a terminal cash rate of 4.1%, with Westpac claiming rates could hit their peak as early as May.
AUTHOR
Charbel Kadib
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