Inflation rate slows to 4.1pc

Inflation continues to fall with the Australian Bureau of Statistics recording a 4.1 per cent rate nationally and 3.6 per cent in Perth for the past year.

The Consumer Price Index rose 0.6 per cent in the December 2023 quarter and 4.1 per cent annually, according to data released today.

In Perth, the ABS recorded an annual rise of 3.6 per cent from the corresponding quarter of the previous year while Perth’s CPI rose 1.5 per cent in the December quarter, compared to the September quarter.

Despite the lower numbers, Perth recorded the highest CPI growth out of the Australian capital cities with the ABS data showing electricty prices having risen 56.7 per cent.

"The rise was due to the unwinding of the first instalment of the Energy Bill Relief Fund rebates introduced from July 2023, partially offset by the introduction of the second instalment for all households from December 2023," the ABS said.

WA Treasurer Rita Saffioti said the decline in Perth's inflation to 3.6 per cent was the lowest of the mainland states' rates.

"We know Western Australian households have been doing it tough due to national and global price pressures," she said.

“Cost of living relief remains our government’s highest priority, which is why we have delivered billions of dollars in measures to ease cost of living pressures, such as household electricity credits, capping public transport fares and regional airfares, and keeping growth in household fees and charges well below inflation.

"We continued our focus on cost-of-living relief, which is why earlier this week, we announced free public transport for Western Australian school students, saving families with two children around $560 per year.”

ABS prices statistics head Michelle Marquardt said the national rate was the smallest quarterly rise since the March 2021 quarter.

"The CPI rose 0.6 per cent in the December quarter, lower than the 1.2 per cent rise in the September 2023 quarter,” she said.

“While prices continued to rise for most goods and services, annual CPI inflation has fallen from a peak of 7.8 per cent in December 2022, to 4.1 per cent in December 2023.”

Federal Treasurer Jim Chalmers said headline inflation was at its lowest level in two years.

"These new figures show we are making welcome and encouraging progress in the inflation challenge and that government’s policies are helping, but this is not mission accomplished because people are still under pressure," he said.

"Monthly inflation has a ‘3’ in front of it for the first time since December 2021.  

"The monthly numbers do bounce around a bit, but it is almost half the 6.1 per cent recorded in May 2022, at the time of the election. Today's welcome results are even better than the median market expectation."

Economists' response

Deloitte Access Economics partner Stephen Smith said the recent CPI data showed that the Australian economy was slowing.

“The fight against inflation is not yet over, and the rest of that path is unlikely to be smooth,” he said.

“Tensions in the Middle East, Australia’s housing crisis and a disorderly energy transition all threaten to cause fits and spurts of inflation over the next 12 months.

“Overwhelmingly, however, 2024 will see the focus of economists and policymakers shift from lowering the rate of inflation to lifting the rate of economic growth.”

However, Mr Smith said Australian households remained under pressure.

“December was a Christmas disaster for retailers, and spending is expected to remain weak for some time yet,” he said.

“The RBA’s hawkishness means it will not be in a hurry to cut interest rates.

“Deloitte Access Economics’ expectation is still that the next move in interest rates will be a cut in September 2024.”

Moody’s Analytics economist Harry Cruise said inflation across the final three months of the year dropped to 4.1 per cent from the 5.4 per cent recorded in the September quarter.

“The result was better than we and the market expected,” he said.

“The odds of a hike were low leading into the December inflation print, but the latest inflation data confirm the Reserve Bank of Australia’s next move will be down.

“Inflation will keep falling, but the pace will slow. It’s often said that the final mile of bringing down inflation is the hardest.

“Making things more difficult, stage three tax cuts already in our baseline forecasts will hand back cash to households at the exact same time the RBA will be trying to take money out of the economy.”