Key takeaways
The prospect of another interest rate hike next month has become more remote after inflation fell faster than expected.
Monthly CPI indicator fell to 4.3% year on year from 4.9%
Ex Fuel, Fruit & Veg and Travel slows to 4.8% y/y from 5.1%y/y
Detail suggests still elevated services inflation, but also some moderation
Data does not challenge the RBA’s inflation forecasts, more likely to undershoot
Nothing in the data supports a rate increase in February, nor does it support a rate cut
The prospect of another interest rate hike next month has become more remote after inflation fell faster than expected.
The monthly CPI Indicator came in at 4.3% in the year to November, down from 4.9% in October and a recent peak of 8.4% in December 2022.
However, Treasurer Jim Chalmers has emphasised that the fight against inflation is far from over, noting that monthly inflation figures can be volatile. He adds that the recent rise in inflation in Europe and the global economic uncertainty means that Australia cannot be complacent about the inflation challenge.
The RBA will place more emphasis on the quarterly CPI stats that come out at the end of the month, but there is nothing in this data to suggest another rate rise in February.
Dropping petrol prices were a major reason by the fall in inflation.
Automotive fuel inflation slid to 2.3 per cent in the year to November, down from 8.6 per cent in October.
Michelle Marquardt, ABS head of prices statistics, said:
"This month’s annual increase of 4.3 per cent is down from the 4.9 per cent rise in October and is the smallest annual increase since January 2022.”
The most significant contributors to the November annual increase were Housing (+6.6 per cent), Food and non-alcoholic beverages (+4.6 per cent), Insurance and financial services (+8.8 per cent) and Alcohol and tobacco (+6.4 per cent).
"CPI inflation is often impacted by items with volatile price changes like Automotive fuel, Fruit and vegetables, and Holiday travel. It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation.
“When excluding these volatile items from the monthly CPI indicator, the annual rise in November was 4.8 per cent, lower than the annual rise of 5.1 per cent in October,” Ms Marquardt said.
Housing rose 6.6 per cent in the 12 months to November, up from the 6.1 per cent annual increase in October. New dwelling prices rose 5.5 per cent over the year, reflecting higher labour and material costs.
Rent prices rose 7.1 per cent in the 12 months to November, reflecting low vacancy rates and a tight rental market.
“The increase in Commonwealth Rent Assistance has reduced out-of-pocket rent costs for eligible tenants since its introduction on 20 September 2023. Excluding these changes to rent assistance, Rents would have increased 8.8 per cent over the year to November 2023,” Ms Marquardt said.
Electricity prices rose 10.7 per cent in the 12 months to November reflecting increases in wholesale prices from annual price reviews in July 2023. Electricity price rises have been partly offset by the introduction of the Energy Bill Relief Fund rebates for eligible households from July 2023.
“Electricity prices have risen 8.8 per cent since June 2023. Excluding the rebates, Electricity prices would have increased 19.0 per cent over this period,” Ms Marquardt said.
Food and non-alcoholic beverages rose 4.6 per cent in the 12 months to November, down from the 5.3 per cent annual increase in October.
"Annual inflation for Food and non-alcoholic beverages remains elevated for most categories. Exceptions were categories with predominately fresh food such as Meat and seafood and Fruit and vegetables, which continue to have low inflation due to favourable weather conditions increasing supply and keeping prices lower," Ms Marquardt said.
Automotive fuel prices rose 2.3 per cent in the 12 months to November, down from the annual increase of 8.6 per cent in October. In monthly terms, Automotive fuel prices fell 0.5 per cent as crude oil prices continued to soften, reaching a five-month low.
"Annual inflation for Automotive fuel has fallen from 19.7 per cent in September 2023 to 2.3 per cent in November. This has been a significant contributor to the lower annual rise in the monthly CPI indicator over the past two months," Ms Marquardt said.
