More good news for anyone still paying attention. The latest consumer price index (CPI) indicators shows inflation is continuing to abate. It was at 5.4% in June, but over the year to July the price rise over the last year is down to 4.9%. That’s actually less than the minimum wage decision of 5.75% meaning some people are getting ahead! Wow!
The mellow results send a cool breeze through our central bank. The nervous central banker can relax a little: we are following America down. US inflation is down to around 3% and ours is headed in the same direction. The rate hike frenzy is almost certainly over at this point. Official rates of 4.1% are looking like our top, for now at least. Markets are pricing in basically no change at all in the next 18 months.
What comes next could be a very disappointing time for Reserve Bank (RBA) board meeting junkies. A generation has been classically conditioned to tremble with dread and excitement on the first Tuesday of the month. Their dopamine receptors may have to learn to do without. New RBA boss Michele Bullock is likely to lead the bank through a dull, dry desert of stability after she takes over following the expiration of the current governor’s term in mid-September.
(Unless China implodes. That is looking much less impossible than it did a month ago. Its financial sector is full of bad loans. While the government has been adept at shifting them around so they don’t blow up or don’t do damage when they do, all good things come to an end. It is unclear if the rumblings we are hearing now are the start of a proper Chinese financial crisis, but if they are, hold onto your hats).
So where’s your money going?
Inflation has fallen. That doesn’t mean prices are going down. They’re still going up. Inflation is like acceleration: if you’re accelerating more slowly, your speed is still going up.
So what’s moving where? Some price falls in the year to July were in fruit and vegetables and fuel; these are volatile series. Indeed fuel has gone up again since the data was collected, unfortunately.
Holiday travel is getting cheaper again too as airlines start to put on more flights. Which is not to say travel is cheap right now. Far from it.
Prices are going to stabilise a bit. But whether we’re talking about fuel, holidays or food, it will still take us a long time to get used to them being at this new higher level.
“That’s actually less than the minimum wage decision of 5.75% meaning some people are getting ahead!” OK, I know that’s meant to be facetious, but it would be more accurate to say that some people might be making up a tiny bit of the ground they have lost over the past several years, during which our broken industrial relations system has contributed to systematic wage suppression.
And widespread wage and superannuation theft.
That’s more like it. “Some are actually getting ahead”!!?? Give over.
Oh, some are always getting ahead. The ones who should be losing their heads.
The qualifying comment “assuming China doesn’t blow itself up” pretty much negates the rest of this article according to the chief strategist from Rabobank who was on ABC The Drum the other evening. He pointed out succintly and in great detail that China is in deep trouble economically, why that was so, where it was going in the future and that we’d do well to strategize accordingly. It sounded very logical to me.
The actual CPI index value went from 117.8 for Jan to 120.0 for July. That is 1.9% over 6 months equivalent to 3.8% per annum – it’s almost at the RBA target.
There was 3% inflation in the six months to January ie almost 2/3rds of the last 12 months inflation was last year (Sep-Dec as Dec-Jan had slight deflation.
The CPI numbers are in Table 1 here: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/monthly-consumer-price-index-indicator/latest-release
I thought the minimum wage decision of 5.75% was about compensating people for price increases that had already happened – 7.8% during 2022, so it can’t be “getting ahead” of this year – even if we had zero inflation for the rest of the year their wages just wouldn’t fall behind prices.
Agree, narratives targeting mass of above median age voters &/or retirees that obsess about interest rates for mortgage holders, new owner occupiers and investors, backgrounded by ‘cost of living crisis’ headlines, but then deny or obstruct improved wages, awards & conditions for working age claiming ‘immigrants’ are to blame &/or inflation risk; too easy.
Travel?
Pretty much anyone who gets on an aircraft these days can be considered a climate vandal.