Australian Inflation Eases to 3.5 Percent in July as Electricity Rebates Kick In

Food and alcohol price rises offset the fall in electricity prices.

A woman shops in the refrigerated section of a supermarket in Western Australia on May 4, 2024. Susan Mortimer/The Epoch Times

Australia’s annual inflation eased slightly in July, driven by a fall in the electricity price due to government rebates for consumers.

However, this was offset by rises in food, clothing, alcohol, non-alcoholic beverages, and gas. Housing prices also rose in July but at a slower pace than in June.

Australian Bureau of Statistics (ABS) stats shows the monthly Consumer Price Index (CPI) rose 3.5 percent in the 12 months to July 2024, down from 3.8 percent the previous month.

Housing increased by 4 percent, food and non-alcoholic beverages increased by 3.8 percent, alcohol and tobacco surged by 7.2 percent, and transport rose by 3.4 percent year on year.

Acting ABS head of prices statistics Leigh Merrington said CPI inflation is often impacted by volatile price changes in items like automotive fuel, fruit and vegetables, and holiday travel.

“It can be helpful to exclude these items from the headline CPI to see underlying inflation, which was 3.7 percent in July, down from 4.0 percent in June,” he said.

July’s headline inflation figure reached the lowest level since February, while underlying CPI slid to the lowest level since January 2022.

Electricity Prices Fall Due to Rebates

Electricity prices slid 5.1 percent in the 12 months to July, dramatically dropping from a 7.5 percent rise in June.

The ABS said the new federal and state rebates led to the electricity price fall in July.

“The first instalments of the 2024-25 Commonwealth Energy Bill relief fund rebates began in Queensland and Western Australia from July 2024, with other states and territories to follow from August. In addition, state-specific rebates were introduced in Western Australia, Queensland and Tasmania,” Merrington said.

“Altogether, these rebates led to a 6.4 percent fall in the month of July. Excluding the rebates, Electricity prices would have risen 0.9 percent in July.”

Fruit and Vegetable Inflation Soars

Annual inflation for food and non-alcoholic beverages rose to 3.8 percent in July, up from 3.3 percent in June.

Fruit and vegetable prices rose to 7.5 percent in the 12 months to July, up from 3.6 percent in June. Strawberries, grapes, broccoli, and cucumbers led to the highest prices since December 2022 year over year.

Housing inflation of 4 percent in the 12 months to July dropped dramatically from 5.5 percent in June.

Meanwhile, rent inflation of 6.9 percent for the year to July was down from a jump of 7.1 percent in the 12 months to June.

The Reserve Bank of Australia (RBA) is due to hold a board meeting from Sept. 23 to Sept. 24 to decide on it’s next interest rate move.

In response to the ABS data, ANZ economists said they do not believe today’s figures would change the Reserve Bank’s outlook on interest rates.

“We do not think today’s print will affect the RBA’s thinking, especially given it was the first month of the quarter, when a much lower share of services and non-tradables have price changes measured compared with goods and tradables,” economists Adam Boyton and Catherine Birch said in a research note to investors.

ANZ said that electricity prices were likely to fall “significantly” again in August as rebates kick in around the nation.

Inflation at a 4 Month Low: Treasurer

Treasurer Jim Chalmers said monthly inflation is now at a four‑month low and trimmed mean inflation has reached a six‑month low,” he said.

“It’s a promising result but we’re not complacent because we know that people are still under pressure,” he said on Aug. 28.

“We recognise that people are under pressure and we’re doing something about it. Our economic plan is all about tackling inflation and easing the cost of living without smashing an economy which is already weak, and today’s data confirms our policies are making a meaningful difference.”

However, Shadow Treasurer Angus Taylor said on Aug. 27 that the Coalition wants to see a permanent reduction in inflation in the country.

“We need to see a focus on helping young Australians get into a home. But right now we have an immigration policy in this country which is way beyond what our housing stock is capable of dealing with, and there is no initiative this government is pursuing that is getting close to solving these problems,” he said in a press conference.

“It is about getting back to basics.”