Inflation at lowest level since early 2022, easing fears of rates rise

The Australian Bureau of Statistics (ABS) on Wednesday revealed the consumer price index (CPI) rose by 4.9 per cent over the last year – the lowest the measure has been at since the same figure was recorded in February 2022.

“This month’s annual increase of 4.9 per cent is down from 5.4 per cent in June,” ABS head of prices statistics Michelle Marquardt said.

Rising inflation has been pushing food prices up. — Inflation in Australia has slowed to its lowest level in a year and a half. (SMH / James Alcock)

“Annual price rises continue to ease from the peak of 8.4 per cent in December 2022.”

Even when price movements in volatile categories were discounted, the CPI still fell, although the decrease was less pronounced.

“CPI inflation is often impacted by items with volatile price changes like automotive fuel, fruit and vegetables, and holiday travel,” Marquardt said.

“It can be helpful to exclude these items from the headline CPI indicator to provide a view of underlying inflation.

“When excluding these volatile items, the decline in annual inflation is more modest at 5.8 per cent in July, compared to 6.1 per cent in June.”

Reserve Bank of Australia building in Martin Place in Sydney — Cooling inflation has eased concerns the RBA will hike interest rates next week. (Photo by Brook Mitchell / Getty Images)

The ease in inflation was driven primarily by price drops for petrol and fuel (-7.6 per cent) and fruit and vegetables (-5.4 per cent).

However, costs are still surging in some areas. Electricity prices soared 15.7 per cent over the past 12 months and 6 per cent in July alone – a figure that would have been even higher had it not been for government relief.

“The Energy Bill Relief Fund provides eligible households with rebates ranging from $43.75 to $250 in July,” Marquardt said.

“If we exclude the impact of rebates from the July 2023 figures, electricity prices would have recorded a monthly increase of 19.2 per cent.”

Tenants across the country would also be unsurprised to see rents continuing to rise. They increased by 7.6 per cent in the past 12 months, up from 7.3 per cent in June.

Further exacerbating issues in the housing market, the ABS also revealed housing construction approvals fell 8.1 per cent in July, on the back of a 7.9 decrease in June.