Inflation Decreases but Not Enough to Bring Interest Rates Down

Inflation Drops, but Interest Rates Remain High

April 24, 2024 TruthUSA

The pressure on the nation’s renters continues to rise, with rents increasing by 2.1 percent, the fastest growth in 15 years.

Australia’s inflation rate decreased in the year to March but is not significant enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates in the near future.

The latest data released today by the Australian Bureau of Statistics (ABS) showed that the annual consumer price index (CPI) dropped from 4.1 percent in December to 3.6 percent in March, contrary to market analysts’ prediction of a slip to as low as 3.5 percent.

The RBA indicated its target range for an interest rate cut at 2-3 percent, but the increasing tensions in the Middle East and their impact on oil prices are likely to delay any imminent cuts over the next quarter.

Quarterly inflation rose to 1 percent from 0.6 percent in the last quarter of 2023, with a further increase to 0.8 percent predicted for the three months ending in March 2024.

“Having declined towards the end of 2023, headline inflation is struggling to maintain that momentum,” Harry Murphy Cruise, an economist with Moody’s Analytics, commented to The Guardian.

Mr. Murphy Cruise attributed the hindrance in further rate drops to service inflation, particularly from service-related categories like education, health, and hospitality.

Housing Pressures

Inflation peaked in December 2022 at 7.8 percent, a level considered unsustainable by many economists. This surge was fueled by disruptions in global supply chains, exacerbated by the COVID-19 pandemic and geopolitical tensions.

Responding to the rising inflationary pressures, the RBA has indicated a shift in its monetary policy stance. While it remains committed to keeping interest rates low for economic recovery, it also acknowledges the necessity of closely monitoring inflation and being prepared to adjust policy settings when needed.

The Australian government has also announced measures to ease cost-of-living pressures, including targeted support for low-income households and initiatives to improve housing affordability.

Australia has been grappling with housing pressures, particularly in major cities, which have seen significant increases in property prices and rents in recent years. Various factors contribute to this trend, such as population growth, low housing supply, and investment activity.

The pressure on the nation’s renters continues to rise, with rents increasing by 2.1 percent, marking the fastest growth in 15 years.

Perth witnessed the highest rental increase at 9.9 percent, followed by ongoing supply issues in Sydney with an 8.9 percent increase, and Melbourne recording a 6.9 percent rise.

The only relief for consumers in the quarter came from a 1.7 percent decline in electricity prices in the March quarter. However, this reduction can be attributed to the federal government’s National Energy Bill Relief Plan, providing eligible individuals a rebate of up to $500 off their electricity bills for the 2023-24 financial year.

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