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Australia's Inflation Eases, Paving Way for Potential Rate Cut
January 29, 2025 at 8:54 AM GMT+0

Australia's Inflation Eases, Paving Way for Potential Rate Cut

Australia's core inflation cooled more than expected in the final quarter of 2024, indicating that an interest-rate cut may be imminent, potentially as early as next month. According to a Bloomberg report, the annual trimmed mean gauge of consumer prices, which excludes volatile items, increased by 3.2% in the three months through December, against the predicted 3.3% rise. Quarterly, core consumer prices grew 0.5%, below the anticipated 0.6%.

This deceleration has led to the Australian dollar sliding and a drop in yields on policy-sensitive three-year government bonds by as much as 7 basis points. Stock markets saw gains as money markets adjusted expectations for a February rate cut, now over 90% likely.

Diana Mousina, deputy chief economist at AMP Ltd., remarked that today's data "cements a February rate cut," emphasizing that the reasons for a cut are more compelling than those to maintain the status quo. Mousina noted significant slowing in inflation within problem areas such as rents, medical, and dining out, suggesting that the phase of goods inflation is ending, while services inflation remains a concern.

This trend is reinforcing the RBA's confidence in aligning inflation back to target. Policymakers, at their December meeting, adopted a dovish outlook, contemplating either rate reductions or retention at the current 4.35%, the highest in 13 years since late 2023. The Reserve Bank of Australia (RBA) is projected to revise its inflation forecasts to accommodate the start of an easing cycle, as predicted by economist James McIntyre.

However, RBA must proceed cautiously at its upcoming meeting, as annual services prices stand elevated at 4.3%, driven by rents and medical services. Notably, non-discretionary goods prices dipped 0.5% during the quarter while discretionary items rose 1.1%, marking a rare occasion where non-discretionary inflation is lower than discretionary, reflecting robust consumer spending.

IndexBox data highlights the strong labor market and rising consumer spending, possibly perpetuating inflation. The RBA remains wary of combined effects of consumption rebound and labor market strength thwarting inflation reduction efforts. Economist Sean Langcake cautions the RBA to be mindful of the economy operating near full capacity, as subsidy phase-outs could rekindle headline inflation soon.

Upcoming elections pose additional fiscal challenges as political parties might engage in aggressive spending to gain supporters. In its strategy to combat inflation, the RBA chose a lower peak rate compared to other global central banks, considering heavily-geared households facing high mortgage repayments.

Australia stands distinct in its cautious approach to easing, while counterparts like the Federal Reserve have considerably slashed rates. With an unemployment peak anticipated at 4.5% this year (up from the current 4%), the RBA is set to update its forecasts on February 18. The trimmed mean CPI is forecast to reach 3.4% by end of 2024, before settling into the target range by mid-2025.

Source: IndexBox Market Intelligence Platform

  1. 1. INTRODUCTION

    Making Data-Driven Decisions to Grow Your Business

    1. REPORT DESCRIPTION
    2. RESEARCH METHODOLOGY AND AI PLATFORM
    3. DATA-DRIVEN DECISIONS FOR YOUR BUSINESS
    4. GLOSSARY AND SPECIFIC TERMS

  2. 2. EXECUTIVE SUMMARY

    A Quick Overview of Market Performance

    1. KEY FINDINGS
    2. MARKET TRENDS This Chapter is Available Only for the Professional Edition PRO

  3. 3. MARKET OVERVIEW

    Understanding the Current State of The Market and Its Prospects

    1. MARKET SIZE
    2. CONSUMPTION BY COUNTRY
    3. MARKET FORECAST TO 2030

  4. 4. MOST PROMISING PRODUCT

    Finding New Products to Diversify Your Business

    This Chapter is Available Only for the Professional Edition PRO
    1. TOP PRODUCTS TO DIVERSIFY YOUR BUSINESS
    2. BEST-SELLING PRODUCTS
    3. MOST CONSUMED PRODUCT
    4. MOST TRADED PRODUCT
    5. MOST PROFITABLE PRODUCT FOR EXPORT

  5. 5. MOST PROMISING SUPPLYING COUNTRIES

    Choosing the Best Countries to Establish Your Sustainable Supply Chain

    This Chapter is Available Only for the Professional Edition PRO
    1. TOP COUNTRIES TO SOURCE YOUR PRODUCT
    2. TOP PRODUCING COUNTRIES
    3. TOP EXPORTING COUNTRIES
    4. LOW-COST EXPORTING COUNTRIES

  6. 6. MOST PROMISING OVERSEAS MARKETS

    Choosing the Best Countries to Boost Your Exports

    This Chapter is Available Only for the Professional Edition PRO
    1. TOP OVERSEAS MARKETS FOR EXPORTING YOUR PRODUCT
    2. TOP CONSUMING MARKETS
    3. UNSATURATED MARKETS
    4. TOP IMPORTING MARKETS
    5. MOST PROFITABLE MARKETS

  7. 7. GLOBAL PRODUCTION

    The Latest Trends and Insights into The Industry

    1. PRODUCTION VOLUME AND VALUE
    2. PRODUCTION BY COUNTRY

  8. 8. GLOBAL IMPORTS

    The Largest Importers on The Market and How They Succeed

    1. IMPORTS FROM 2012–2024
    2. IMPORTS BY COUNTRY
    3. IMPORT PRICES BY COUNTRY

  9. 9. GLOBAL EXPORTS

    The Largest Exporters on The Market and How They Succeed

    1. EXPORTS FROM 2012–2024
    2. EXPORTS BY COUNTRY
    3. EXPORT PRICES BY COUNTRY

  10. 10. PROFILES OF MAJOR PRODUCERS

    The Largest Producers on The Market and Their Profiles

    This Chapter is Available Only for the Professional Edition PRO

  11. 11. COUNTRY PROFILES

    The Largest Markets And Their Profiles

    This Chapter is Available Only for the Professional Edition PRO
    • United States
    • China
    • Japan
    • Germany
    • United Kingdom
    • France
    • Brazil
    • Italy
    • Russian Federation
    • India
    • Canada
    • Australia
    • Republic of Korea
    • Spain
    • Mexico
    • Indonesia
    • Netherlands
    • Turkey
    • Saudi Arabia
    • Switzerland
    • Sweden
    • Nigeria
    • Poland
    • Belgium
    • Argentina
    • Norway
    • Austria
    • Thailand
    • United Arab Emirates
    • Colombia
    • Denmark
    • South Africa
    • Malaysia
    • Israel
    • Singapore
    • Egypt
    • Philippines
    • Finland
    • Chile
    • Ireland
    • Pakistan
    • Greece
    • Portugal
    • Kazakhstan
    • Algeria
    • Czech Republic
    • Qatar
    • Peru
    • Romania
    • Vietnam

  12. LIST OF TABLES

    1. Key Findings In 2024
    2. Market Volume, In Physical Terms, 2012–2024
    3. Market Value, 2012–2024
    4. Per Capita Consumption, By Country, 2018–2024
    5. Production, In Physical Terms, By Country, 2012–2024
    6. Imports, In Physical Terms, By Country, 2012–2024
    7. Imports, In Value Terms, By Country, 2012–2024
    8. Import Prices, By Country Of Destination, 2012–2024
    9. Exports, In Physical Terms, By Country, 2012–2024
    10. Exports, In Value Terms, By Country, 2012–2024
    11. Export Prices, By Country Of Origin, 2012–2024

  13. LIST OF FIGURES

    1. Market Volume, In Physical Terms, 2012–2024
    2. Market Value, 2012–2024
    3. Consumption, By Country, 2024
    4. Market Volume Forecast to 2030
    5. Market Value Forecast to 2030
    6. Products: Market Size And Growth, By Type
    7. Products: Average Per Capita Consumption, By Type
    8. Products: Exports And Growth, By Type
    9. Products: Export Prices And Growth, By Type
    10. Production Volume And Growth
    11. Exports And Growth
    12. Export Prices And Growth
    13. Market Size And Growth
    14. Per Capita Consumption
    15. Imports And Growth
    16. Import Prices
    17. Production, In Physical Terms, 2012–2024
    18. Production, In Value Terms, 2012–2024
    19. Production, By Country, 2024
    20. Production, In Physical Terms, By Country, 2012–2024
    21. Imports, In Physical Terms, 2012–2024
    22. Imports, In Value Terms, 2012–2024
    23. Imports, In Physical Terms, By Country, 2024
    24. Imports, In Physical Terms, By Country, 2012–2024
    25. Imports, In Value Terms, By Country, 2012–2024
    26. Import Prices, By Country, 2012–2024
    27. Exports, In Physical Terms, 2012–2024
    28. Exports, In Value Terms, 2012–2024
    29. Exports, In Physical Terms, By Country, 2024
    30. Exports, In Physical Terms, By Country, 2012–2024
    31. Exports, In Value Terms, By Country, 2012–2024
    32. Export Prices, 2012–2024

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