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Inflation Expectations up 0.9% points to 6.5% in November – the highest since January 2011 - featured image
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Inflation Expectations up 0.9% points to 6.5% in November – the highest since January 2011

I know inflation is probably on your mind.

In fact, it has a lot of property investors and homeowners worried.

And I can understand why.

Most Aussies have never experienced rising inflation or periods or rising interest rates.

In November 2022 Australians expected inflation of 6.5% annually over the next two years, up 0.9% points from October, according to the latest data from Roy Morgan research.

Inflation Expectations Index For The Next Two Years

Source: Roy Morgan Research

Michele Levine, CEO of Roy Morgan said:

“Inflation Expectations soared in the month of November, up 0.9% points to 6.5%, the largest monthly jump ever recorded in the history of the index.

Inflation Expectations have followed a pattern all year of ‘two months up and two months’ down which has now persisted for ten straight months.

The sharp rise in Inflation Expectations followed the return of the petrol excise in early October, which added around 25 cents per litre to the cost of petrol, and extreme weather events in NSW and Victoria that have led to extensive flooding that has lifted the price of many food and grocery products.

Petrol prices peaked in mid-November at $1.99 per litre.

Although Inflation Expectations spiked in November, the early indications are that they have softened again in December as petrol prices have retreated from their mid-November peak."

Inflation Expectations Vs Average Retail Petrol Prices

Source: Roy Morgan Research

Interestingly, Inflation Expectations in November are 1.6% points higher than a year ago in November 2021, and more than double the record low of 3.2% reached just over two years ago in August 2020.

Inflation Expectations have increased for a second straight month and hit their highest level since January 2011 when the measure reached a record high of 6.6%.

The reading of 6.5% for November looks to be the high point for the indicator this year as Inflation Expectations have dropped in recent weeks.

Inflation Expectations soar during the last two years and are highest for renters

Based on the data, Inflation Expectations by home ownership status shows large increases across the different home ownership categories over the last two years.

Inflation Expectations By Homeownership Status

Ms Levine commented:

"A look at Inflation Expectations by home ownership status shows the measure has increased substantially over the last two years for all of the three main categories.

Renters have the highest Inflation Expectations at 6.8%, up 1.7% points in a year and up 3.2% points since November 2020.

Just behind are people who own their home with Inflation Expectations of 6.7%, almost double the level of two years ago of 3.4% in November 2020.

People who are paying off their homes have Inflation Expectations of 6.1%, but this is still up 3% points over the last two years.

Although these are the highest Inflation Expectations Australians have held for over a decade since the peak of the mining boom in 2011, they are now below the latest ABS CPI figure for the year to September 2022 of 7.3%."

Overall Inflation Expectations have increased from 3.4% in November 2020 to 4.9% a year ago (+1.5%) and now 6.5%, up 1.6% points from a year ago and up 3.1% points from two years ago.

The Inflation Expectations of renters are highest at 6.8% in November, up 1.7% points from a year ago and up 3.2% points from November 2020.

Ms Levine commented further:

“The rising level of inflation this year has led the RBA to increase official interest rates by a total of 3% points to 3.1% since their first increase in early May.

This is the highest interest rates have been for over a decade since November 2012.

However, despite the increases official interest rates are still below the long-term average of just over 4.1% since the RBA gained its independence in 1992.

Although there are significant challenges facing the Australian economy the latest ARA-Roy Morgan pre-Christmas spending forecasts show Australians are predicted to spend a record $66 billion during the run-up to Christmas, up 6.4% points on a year ago.

The strength of the Australian economy has been illustrated over the last few months with record retail spending in September and October of over $35 billion causing the initial forecasts for Christmas spending to be upgraded by over $2 billion.”

People who own their own home have almost as high Inflation Expectations at 6.7%, up 3.3% points from two years ago, while it is those paying off their home who have the lowest Inflation Expectations at 6.1%, but this is still up by 3% points from two years ago.

Inflation Expectations are highest in Queensland and NSW and lowest in Tasmania

Looking at Inflation Expectations across states, Inflation Expectations were highest in Queensland at 6.8% followed by New South Wales at 6.6%.

Meanwhile, Inflation Expectations were in line with the national average in both Victoria and South Australia at 6.5%.

On the other hand, Inflation Expectations in Western Australia were just below the national average at 6.4% while they were clearly the lowest of all in Tasmania at 5.7%.

Overall, Inflation Expectations in all States were up a month ago.

About Robert Chandra is a Property Strategist at Metropole and has an intrinsic understanding of property markets backed by many years of real estate experience. This coupled with several degrees gives him a holistic perspective with which he can diagnose clients’ circumstances and goals and formulate strategies to bridge the gap.
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