What do you think is going to happen to inflation?
If you're interested in property that's a pretty important question as inflation flows through to interest rates and has a significant effect on property values.
A recent survey by Roy Morgan Research showed that Australians expect inflation of 4.5% over the next two years.
This is up 0.2% in a month and up a sizeable 0.6% from a year ago in August 2016 but well below the seven year average of 5.1%.
This Roy Morgan Inflation Expectations Index is based on a nationwide face-to-face survey of 4,064 Australians aged 14+ interviewed in August.
Roy Morgan Inflation Expectations Index – Expected Annual Inflation in next 2 years
Source: Roy Morgan Single Source: Interviews with an average of 4,000 Australians aged 14+ (April 2010 – August 2017).
Analysis by State shows Inflation Expectations are highest in Tasmania at 4.9% closely followed by New South Wales (4.8%) and Queensland at 4.6%.
Inflation Expectations in Australia’s other States were below the national average: Victoria (4.3%), South Australia (4.2%) and once again lowest in Western Australia at 3.7%.
Analysing Inflation Expectations by Federal voting intention shows Greens supporters (3.9%) and L-NP supporters (4.1%) have the lowest Inflation Expectations below ALP supporters at 4.5% and supporters of Independents/ Others have the highest Inflation Expectations of 4.7%.
Analysing Inflation Expectations by generations reveals a clear split in how different generations view Inflation.
The two youngest generations consistently have higher Inflation Expectations than older generations.
Generation Z (born 1991-2005) has been the highest of all for most of the past six years and is now at an average of just over 4.5% over the past six months.
Despite being higher than any other generation, this is still a significant fall from when this survey began in 2010 (5.7%) and a more recent high for Generation Z of 6.1% in September 2014.
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Generation Y, often simply called the ‘Millennials’ with Inflation Expectations of just under 4.5% in August is now just behind their younger cohort although this is also down significantly from 2011 (5.6%) and a recent high of 5.3% in June 2014.
Inflation Expectations by Generations – Generations Y & Z clearly the highest
Source: Roy Morgan Single Source: Interviews with an average of 4,000 Australians aged 14+ (April 2010 – August 2017). 6 month moving average. **NB: Roy Morgan ‘Generations’ definitions: Pre-Boomers — Born pre-1946; Baby Boomers — born 1946-1960; Generation X — born 1961-1975; Generation Y — born 1976-1990; Generation Z — born 1991-2005.
Baby Boomers, born 1946-1990, and many of whom are now hitting retirement age, have the lowest Inflation Expectations of just 3.9% – a mantle they have held since November 2015.
Baby Boomer Inflation Expectations have fallen farther than any other generation since this survey began in 2010, although they have picked up since hitting a low of 3.5% in October 2016.
“Roy Morgan Inflation Expectations Index rose 0.2% to 4.5% in August and are now up a significant 0.6% from a year ago in August 2016 (3.9%) – the equal lowest Inflation Expectations since the Index began in April 2010.
“Inflation Expectations are highest in New South Wales (4.8%), Queensland (4.6%) and Tasmania (4.9%) but are lagging in the other southern States of Victoria (4.3%), South Australia (4.2%) and lowest of all in post mining-boom Western Australia (3.7%).
“Analysing Inflation Expectations by Generation reveals the younger Generations consistently expect higher inflation than older generations – and it’s Generation Z which has had consistently higher Inflation Expectations than any other Generation since 2011 ahead of their older brothers and sisters in Generation Y.
“In contrast it is Baby Boomers who have had the lowest Inflation Expectations for the past two years. Before that it was the pre-Boomers, those born pre-1946 and mostly now retired, who had lower inflation expectations than anyone else between 2011 and 2015.
“Since bottoming around a year ago in mid-2016, the Inflation Expectations of all five Generations have increased significantly. The Inflation Expectations of mostly retired pre-Boomers, up from 3.8% in October 2016 to 4.3% now have increased more than any other over the past year which should be a concern to the L-NP Government who traditionally perform well amongst older age groups.”
This face-to-face Morgan Poll on Australian inflation expectations was conducted during the month of August 2017 with an Australia-wide cross-section of 4,064 Australians aged 14+.
Source: Roy Morgan Research