The latest inflation figures showed that it increased at a faster rate in November than it did in October, dashing hopes of a stop to interest rates rises at the start of this year.
The main driver of high inflation continues to be housing.
Construction cost increases are starting to slow but high advertised rents are now starting to hit sitting rents.
In addition to this, food costs are rising due to flooding and fuel cost increases continue to be a problem.
While inflation remains high, there are clear signs that the Australian economy is slowing on the back of two releases of economic data this week.
Job vacancies are now starting to decline with 23,000 fewer jobs being advertised in November 2022 compared to August.
The number of jobs available remains particularly high but interest rate increases are clearly starting to slow some industries.
The second data release was building approvals which have declined by over 15 per cent from last year.
Rising construction costs and the slow down in buyer demand is having an impact on the demand for new homes.
At some point soon, that will flow through to construction costs which should start to stabilise in the first half of this year.
While job vacancies and building approvals have been impacted by interest rate rises, we are still spending up big.
Black Friday sales drove retail sales to record highs in November, however it may be that this sales event pulled forward sales that would have otherwise been made in December.
For now, any mortgage or rental stress that people may be feeling is yet to flow through to spending on goods and services, a situation that is likely to change this year.
While the Australian economy is slowing and inflation remains stubbornly high, there was some good news out of the US on Friday.
US inflation is coming back relatively quickly and is now down to 6.5 per cent.
Unlike Australia, higher interest rates are cutting into retail spending and inflation is further being slowed by reduction in fuel costs and improved supply chains.
The start of 2023 continues to look challenging with inflation still high and interest rate rises continuing.
But with signs that the economy is slowing and other factors driving price growth abating, it is looking that inflation should start to ease soon.
It won’t be a particularly enjoyable start to the year for mortgage holders but ideally interest rates will start to plateau sometime in the first half of the year.