Australia’s annual inflation rate stays within expected limits, with inflation rising to 3.8% for the year 2024. This has given people some peace of mind ahead of the Reserve Bank of Australia (RBA) meeting, as the fears that the institution will raise rates lessen.
The consumer price index is a rate that’s regarded as one of the main parameters for gauging inflation, and the latest data from the Australian Bureau of Statistics (ABS) shows that the figure met market expectations. In the June 2024 quarter, the consumer price index rose 1.0%, with the annual percentage staying at 3.8.
This presents the perfect ground for the RBA to keep interest rates where they currently are – at 4.5%.
It’s superfluous to say that stable inflation rates benefit a number of industries, such as retail, gambling, and healthcare. Retailers are likely to face cash flow disruptions, high storage costs, and excess inventory, while gambling is one of the first things people give up when experiencing a lack of funds, leading to fewer visits to the top online casino sites in Australia. However, Ciaran McEneaney says these sites offer incredible bonuses, meaning players can get more while spending less, and that they’ll also provide tools and resources to help you gamble responsibly. These include the ability to set limits for deposits, time, and spending.
Perhaps the most damaging effects of inflation can be seen in the healthcare industry, as it tends to put upward pressure on medical prices, making it impossible for many to afford even the most basic check-ups.
Thus, the fact that inflation is under control is great news for multiple industries, as well as individuals who can benefit from stable interest rates.
A Breakdown of Consumer Price Index’s Annual Movement
Australian Bureau of Statistics recently came out with interesting data. As their head of prices statistics, Michelle Marquardt said this rise marks the first Consumer Price Index in almost two years. The March 2024 quarter saw a 1.0% rise, which is on par with the June quarter.
However, the March quarter reported an annual rise of 3.6%, and it rose to 3.8% in the June quarter. Things have been relatively stable since December 2022, so this quarter’s rise marks the first annual increase since then.
Other experts, such as David Robertson, were quick to chime in with their predictions on the possible rate hike. As Bendigo Bank Chief Economist, he claimed that his bank predicted that the rates would remain unchanged at least until next year, marking a rate increase as very unlikely.
In his July economic update, Robertson said that rate cuts are likely to come in 2025. According to him, the somewhat disappointing figures don’t necessarily imply another rate hike, but they do further defer RBA cuts. Most economists and markets are no longer counting on rate cuts this year, as there’s a 50% chance of another hike.
Australia Isn’t the Only Country Facing This Problem
America seems to be in the same predicament, as reheating inflation at the beginning of the year has annihilated the hopes for interest rate cuts. The USA has been showing signs of a slowing economy, making the Federal Reserve (FED) likely to start aggressively cutting interest rates.
The upcoming presidential election is only heating things up, with Nobel Prize-winning economists warning inflation might go out of control if Trump wins. The Republican candidate’s economic plans are a source of many debates, with experts claiming that the permanent tax cuts and increased tariffs could lead to another inflation surge.
There are signs that employers are attempting to cut down on costs in the face of a probable recession, and one way to do that is by firing the least protected workers. This scenario might be enough to get the FED to stimulate the economy by reducing interest rates by 200 points. It would bring them somewhere between 3.25% and 3.50%, and this positive change is expected to take place over 8 meetings.
The 2025 Forecast
While giving a statement, Robert Davidson also didn’t hold back from sharing his forecast for the year ahead. According to him and the Bendigo bank, they expect the Official Cash Rate to remain unchanged until the end of the year. While the scene is likely to remain stable in 2024, the following year might see a series of RBA cuts.
All the available data serves to further back up their opinion that controlled interest rates are helping ease inflation, which is being kept at a moderate level. That being said, the slow pace of moderation suggests that the earliest time the rates will be cut is May 2025.
Slow or not, it’s undeniable that inflation is expected to continue to moderate, so it should return to the target range of 2 to 3% in 2025, reaching the midpoint of 2.5% sometime in 2026. These predictions are based on the assumption that the cash rate will remain at the current level by the end of 2024.
This comes as great news after facing an inflation rate of 6.61%, which hit Australia—one of the 20 major economies in the world—in 2022. And while it’s impossible to make any long-term predictions, Finbold found data that suggests the positive inflation trend will continue in 2027 and beyond, helping the economy recover after high inflation rates.
As a reminder, the world faced a global problem after the Covid-19 outbreak, which saw strong demand and constrained supply. As a result, prices of food and energy commodities began to rise quickly sometime in the second half of 2021, along with goods and services. For example, the global increase in wheat prices drove up the cost of bread and cereal in Australia.
The inflationary pressures were further fueled by the outbreak of the Russia-Ukraine war, which escalated in February 2022. Of course, human suffering has been the biggest and the most harrowing cost of the war, but it’s also had a devastating effect on numerous economies.
The shocking effects of the war don’t only result in rising inflation rates, but they also slow down economic growth and create a new supply shortage that results in higher prices for groceries and other commodities.
