Australia’s Inflation Drop

Australia’s Inflation rate has dropped to its lowest level of growth in more than three years, but an interest rate cut still remains unlikely when the Reserve Bank of Australia meets next week.

The Consumer Price Index rose 2.8% in the 12 months to September, down from 3.8% growth in the 12 months to June and slightly less than many economists were predicting.

Australian Bureau of Statistics head of prices statistics, Michelle Marquardt, says the September quarter growth was just 0.2%.

She says although prices continue to rise for most goods and services, the inflation figures were offset by large falls in electricity costs and petrol prices.

While insurance costs rose by 14% and childcare by 12.1%.

Although 2.8% appears to sit within the RBA’s target range of 2% to 3% for inflation, which may trigger an interest rate drop, it uses a different figure to calculate what the inflation rate is.

The RBA analyses the data using the “trimmed” inflation rate which takes into account other insights of how inflation is trending which in this case makes it 3.5%.

Last month RBA governor, Michelle Bullock said they wanted more proof that inflation was “sustainably” within its 2% to 3% target range before it cut the official interest rate.

The RBA is meeting on November 4 and 5 but after the inflation figures this week most economists don’t believe it will move to cut interest rates until early in 2025.