Australia is currently suffering from a new 32-year high rise of inflation at 7,8% in the final quarter of the fiscal year of 2022, thus becoming the steepest pace ever since 1990. The Reserve Bank of Australia estimated that inflation would eventually peak at 8%. Travel-related costs, both domestic and international, have the highest rise in price, which came up by 13,3% and 7,6%, respectively. Investors sharply narrowed the odds on the Reserve Bank of Australia (RBA), raising its cash rate by a quarter point to 3,35% when it meets on February 7th, pushing the local dollar up to a five-month high of US$0,7085. Most updated data from the Australia Bureau of Statistics (ABS) showed that the Consumer Price Index (CPI) rose by 1,9% in the quarter of December 2022. The Treasurer of ABS, Jim Chalmers, stated that inflation is “unacceptably high” and even “very high by historical standards.” Chalmers explained to reporters in Canberra that this would likely be the peak in inflation. On Tuesday, the National Australia Bank’s monthly business survey made the worsened business condition more obvious for December, with 12 points for reading and 20 points for a decline from November. NAB explained that a level above zero indicates favorable conditions, while numbers below zero represent unfavorable conditions. NAB hints that the survey reflects putrefied trading conditions, profitability, and employment.
The Australian Bureau of Statistics revealed on Wednesday that the consumer price index (CPI) has risen by 1,9%; they also stated that surging electricity prices and the cost of holiday travel and accommodation drove this. According to the Australian Bureau of Statistics, the annualized figure of a rise in consumer prices is backed by higher prices in food, automotive fuel, and new residential construction. Prices rising - especially energy and food-related - have prompted a chain of eight consecutive interest rate increases from May 2022, as the RBA higher the cash rate saving it from emergency levels to press inflation down towards its 2-3% target band. Although the inflation has started to slow down, economists at ANZ tipped that the RBA would likely have three more 25 basis-point increases by May to bring their interest rate to 3,85% before the hike's end. Throughout the year from January to December, the most significant price rises were domestic and international holiday travel and accommodation, up to 13,3% and 7,6%, respectively; electricity, up to 8,6%; services, up to 5,5%, the most sky-scraping rise since 2008; and new dwelling purchases by owner-occupiers up to 1,7%.
According to Chalmers, the Australian Energy Market Operator had found that projected electricity prices fell precipitously after the Albanese government’s US$1,5 billion energy price relief package temporarily capped gas and thermal coal prices. The Australian Bureau of Statistics also reported the powerful rises in most food and non-food grocery commodities, in spite of having fruit and vegetable prices drop by 7,3% in contrast with the previous quarter. Alongside the inflation, rental price growth in Sydney and Melbourne continued to mount up this quarter, with both cities recording their strongest yearly rises since 2014 and 2015, the ABS said. Following the inflation report release, banks’ stocks that are listed in Australia, such as Commonwealth Bank of Australia, Westpac Banking Group, and National Australia Bank, have erased earlier gains. This officially makes these stocks trading below the flatline that hopefully will drive the central bank to pause in hiking rates to tame inflation. The Australian dollar rose 0,51% and last traded at 0,7082 against the U.S. dollar. As the inflation surge abruptly, on the first Tuesday of February, the Reserve Bank of Australia (RBA) will increase rates to tame this appalling situation.
Sources:
Bloomberg
Financial Times
Reuters
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