INDUSTRY NEWSNationalReal Estate News

Will drop in inflation bring a rates pause?

Inflation has fallen for the second month in a row, bringing with it renewed hope the Reserve Bank will pause interest rates next week.

This morning the Australian Bureau of Statistics released the latest Consumer Price Index, showing inflation had dropped to 6.8 per cent for the year to February.

It was a sharp drop on the 7.4 per cent recorded in January.

“This marks the second consecutive month of lower annual inflation, also known as ‘disinflation’, from the peak of 8.4 per cent in December 2022,” ABS head of prices statistics Michelle Marquardt said.

The most significant contributors to the annual increase seen in February were housing (up 9.9 per cent), food and non-alcoholic beverages (up 8 per cent), transport (up 5.6 per cent) and recreation and culture (up 6.4 per cent).

“The annual increase for the housing group in February (up 9.9 per cent) was lower than January (up 10.4 per cent),” Ms Marquardt said. 

“ New dwellings grew 13 per cent in the 12 months to February, which is the lowest annual growth since February 2022 as price rises for building materials continue to ease.

“Rent prices rose again due to the tight rental market, maintaining the 4.8 per cent annual growth recorded in January.”

Prices for food and non-alcoholic beverages eased slightly from an annual rise of 8.2 per cent in January to 8 per cent in February. 

Meals out and takeaway food (up 7.3 per cent) was the main contributor to the annual increase, followed by food products not elsewhere classified (n.e.c.) (up 11.8 per cent), bread and cereal products (up 12.5 per cent) and Dairy and related products (up 14.3 per cent).

Automotive fuel prices rose 5.6 per cent in the year to February, down from January’s annual rise of 7.5 per cent. While fuel prices drove the increase in Transport, annual growth for fuel is the lowest it has been in two years.

At the time of publication the ASX RBA Rate Indicator, which shows market expectations of a change in the Official Cash Rate, showed 95 per cent of the market expect no change next Tuesday, while 5 per cent expect the cash rate to drop to 3.35 per cent.

Greens Economic Justice spokesperson Senator Nick McKim said falling inflation showed the Reserve Bank has no justification to raise interest rates again next week.”

“Today’s figures are the strongest indication yet that inflation has peaked,” he said.

“For months the RBA has used the spectre of a wage-price spiral to justify repeated and unnecessary rate hikes. That spectre has now been banished.

“By the RBA’s own admission current high inflation was always a supply side problem.

“Rate rises were never the right tool to tackle this bout of inflation. And now that inflation is coming down, the rate rises must stop.”

Show More

Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.