Inflation is back on the rise in Australia, with new figures showing an increase over the 12 months to November, after it had previously dropped to its lowest level in three years.
The Australian Bureau of Statistics (ABS) reported that the Consumer Price Index (CPI) climbed to 2.3% for the year to November, up from 2.1% in October. This jump exceeded predictions, as many had expected inflation to slow to 2.2%.
Interestingly, core inflation—often seen as a better measure of underlying price trends—fell, sparking hope that the Reserve Bank of Australia (RBA) might start cutting interest rates sooner than expected. Bendigo Bank’s Chief Economist David Robertson believes we might see rate cuts as early as May, though February isn’t entirely off the table.
“Today’s data supports the idea of RBA rate cuts in the first half of 2025,” Robertson said. “But we’ll need more encouraging data in the weeks ahead to solidify that forecast. We still expect the first cut in May, with rates potentially dropping by 35 basis points to 4%.”
What’s driving inflation higher? Spending on food, drinks, tobacco, alcohol, and recreation were major contributors. On the flip side, electricity and petrol prices have helped offset some of the increases.
Michelle Marquardt from the ABS explained the impact of electricity rebates: “Annual CPI inflation rose partly due to the timing of electricity rebates. Some states received two payments in October instead of one in July. In November, households received just one payment, so electricity prices didn’t drop as much compared to October.”
Despite this monthly CPI increase, trimmed mean inflation—a measure that smooths out extreme price changes—dropped from 3.5% in October to 3.2% in November.
Fuel prices also ticked up by 0.9% in November, the first rise since June last year, though overall fuel costs remain lower than earlier in the year. Food and beverage prices continued to rise but at a slower pace, with some fruits and vegetables even seeing price drops.
Rent increases stayed steady at 6.6%, while the growth in dwelling prices slowed significantly, from 4.2% in October to just 2.8% for the year to November.
While inflation remains a mixed bag, the trend in core inflation offers some relief, keeping hopes alive for interest rate cuts to ease the burden on borrowers in 2025.
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