Australia’s inflation hits 3.5-year low in Q3

Australian consumer price inflation slowed to a 3-1/2 year low in the third quarter, as per data from the Australian Bureau of Statistics on Wednesday.

The core measure remained stable, indicating that the central bank is unlikely to cut rates until next year.

The report showed a mix of factors, with consumers enjoying government rebates on electricity and lower petrol prices, while service prices remained high.

Market reaction was subdued, with investors reducing the likelihood of a rate cut from the Reserve Bank of Australia in December and February to 24 per cent and 44 per cent, respectively. The most probable timing for the first easing is still seen as April 2025.

The data showed a 0.2 per cent increase in the consumer price index (CPI) for the third quarter, falling below the forecast of 0.3 per cent. Annual inflation dropped to 2.8 per cent, from 3.8 per cent, aligning with the RBA’s 2-3 per cent target band. This slowdown was largely anticipated and driven by government subsidies on electricity (-17.3 per cent) and lower petrol prices (-6.2 per cent).

However, the core inflation measure, which excludes volatile items like food and energy, remained a point of concern for policymakers. The trimmed mean measure rose 0.8 per cent in the quarter, slightly exceeding forecasts of 0.7 per cent. While the annual pace slowed to 3.5 per cent from 4.0 per cent, it still indicated ongoing price pressures.

Attribution: Reuters, Australian Bureau of Statistics report