Australia: Inflation eases in June
Inflation ticked down to 3.8% in June from May’s 4.0%. June’s reading was broadly in line with market expectations but continued to outpace the 2.0–3.0% target range of the Central Bank (RBA). Looking at the details of the release, price pressures for transportation and recreation eased, underpinning the overall slowdown. That said, price growth for housing and utilities plus clothing accelerated.
Accordingly, the trend pointed down, with annual average inflation falling to 4.2% in June (May: 4.3%). May’s result marked the weakest reading since June 2022. Meanwhile, inflation excluding volatile items and holiday travel was unchanged at May’s 4.0%.
Finally, consumer prices increased 0.40% in June over the previous month, coming in above May’s 0.16% rise.
Our panelists expect inflation to be slowing in the second half of the year, tempered by tight financing conditions, a strong Australian dollar and a stronger-than-expected harvest in early 2024 limiting food price growth. Price pressures are forecast to average below 2023 levels in 2024 as a whole, though they are only seen returning to target in H1 2025. Faster-than-expected wage growth and spikes in commodity prices pose key upside risks.
Analysts at Goldman Sachs commented:
“Overall, today’s data support our view that inflationary pressures are easing and will continue to do so over 2024 alongside clearer signs of global disinflation, a very weak domestic household sector, and a softening labour market. We continue to expect the RBA to begin a gradual easing cycle by February 2025.”