Australia’s Inflation Rate Continues Steady Decline at 2.1 Percent

ABS data says this is the lowest annual inflation since July 2021.

Australian Treasurer Jim Chalmers speaks to the media during a press conference at Parliament House in Canberra, Australia on Nov. 21, 2024. AAP Image/Lukas Coch

The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) remained stable at 2.1 percent for the 12 months to October 2024, continuing the trend of steadily declining inflation.

According to Michelle Marquardt, ABS head of prices statistics, this marks the lowest annual inflation rate since July 2021 during the pandemic.

At the same time, CPI has increased in certain sectors like food and non-alcoholic beverages (up 3.3 percent), recreation and culture (up 4.3 percent), and alcohol and tobacco (up 6.0 percent).

Relief was found in energy and fuel prices.

Thanks to taxpayer-backed government rebates, electricity prices dropped a record 35.6 percent over the year to October, marking the largest annual fall in the electricity prices.

Similarly, automotive fuel prices decreased by 11.5 percent, as global demand for oil continues to slow.

Underlying Inflation Shows Modest Increase

While headline inflation has remained relatively stable, underlying inflation measures suggest ongoing challenges.

The annual trimmed mean inflation rose to 3.5 percent, up from 3.2 percent in September.

The CPI excluding volatile items, which focuses on more stable price movements, stood at 2.4 percent, down from 2.7 percent in the previous month.

“The falls in electricity and fuel had a significant impact on the annual CPI measure this month,” Marquardt noted.

“When prices for some items move by large amounts, measures of underlying inflation like the CPI excluding volatile items and holiday travel, and the Trimmed mean can provide additional insights into how inflation is trending.”

According to the latest IMF report, Australia is poised to record an inflation rate of 3.6 percent by the end of 2025, with only Slovakia expected to experience higher inflation among developed nations.

This sharp forecast comes as inflation eases in many other countries, underscoring Australia’s unique economic challenges.

IMF advised the Australian government to adopt a more restrictive fiscal policy to tackle persistent inflation.

The IMF acknowledged that cost-of-living support measures might temporarily lower prices. However, these initiatives could stimulate broader economic activity, potentially complicating inflation.

Meanwhile, any expectation of an interest rate cut in Australia anytime soon has been ruled out.

On Oct. 22, RBA Deputy Governor Andrew Hauser pushed the timeline for rate cuts to May 2025. He warned that while inflation may have peaked, it remains high enough to warrant caution in monetary policy.

Government’s Response: Confidence in Progress

Treasurer Jim Chalmers praised the latest CPI data, noting that inflation is now around a third of what it was when the government inherited it after the last election.

He also pointed out that this was the first time in almost five years that inflation has remained within the Reserve Bank’s target band for three consecutive months.

“This is another really encouraging sign our policies are helping to get inflation down after it was higher and rising under the Liberals,” Chalmers said.

“Today’s figures show monthly inflation has remained in the Reserve Bank’s target band for three consecutive months for the first time in almost five years.”

Chalmers further highlighted that annual trimmed mean inflation had fallen from 4.3 percent to 3.5 percent, while non-tradable inflation, which includes services like healthcare and education, also dropped to 3.0 percent, down from 5.3 percent under the previous government.

“We’re confident but not complacent about the progress we’re making,” Chalmers added.

Opposition Says Expansion of Public Service Not Good for Economy

While the government celebrates these figures, the opposition has continued to criticise its handling of inflation and cost-of-living pressures.

The issue has dominated Question Time most days during Parliament.

“For many Australians, the only way they can continue to support their families and pay their mortgage is to take on extra shifts or a second job,” Taylor said in a statement.

Taylor also attacked the government’s expansion of the public service workforce, pointing to the addition of 26,000 new government workers since Labor took office, costing taxpayers an additional $5 billion.

He argued that Australia’s economic health is being undermined by a bloated bureaucracy and advocated for a stronger private sector.

“An economy where the jobs market and GDP is entirely propped up by the public sector is not how we should be dealing with the cost-of-living crisis,” Taylor added.