Prices are falling in a growing number of areas. In the quarter, prices of salad vegetables such as lettuce, cucumber and asparagus all fell, as did those for cherries, grapes and berries.
Over the past year, lamb prices have dived by 15 per cent, childcare is down by 7.7 per cent while the cost of major household appliances has slipped by 7.1 per cent.
The number of sectors measured by the bureau showing price falls through the quarter increased to 31 while another four were flat. In the September quarter, 22 sectors experienced lower prices while three were flat.
In its most recent forecasts, released in November, the Reserve Bank – which meets for the first time this year next Monday – had expected both headline and underlying inflation to be at 4.5 per cent by the end of 2023.
The ASX200 reached a record high of 7680.7, up 1.1 per cent, on expectations the Reserve Bank had finished with interest rate increases. Financial markets, which had been pricing in a rate cut from September, now expect a reduction from August.
Treasurer Jim Chalmers said with inflation easing and an improvement in real wages, the government’s new income tax cuts would help many people.
“This is not mission accomplished, but it’s welcome and it’s really encouraging progress, and it shows why Labor’s responsible economic management, including our cost-of-living tax cut for middle Australia, has been and will be so important,” he said.
But shadow treasurer Angus Taylor said while inflation was easing, it was still too high, accusing the government of adding to price pressures.
“Labor has smashed household budgets with higher prices, higher mortgage repayments and higher taxes,” he said.
Westpac chief economist and former RBA assistant governor Luci Ellis said borrowers were likely to avoid any further interest rate pain.
“The data flow since November has pointed in this direction, and today’s CPI release seals the deal: the RBA will keep the cash rate on hold next week, and it is unlikely to raise rates further this cycle,” she said.
PinPoint chief economist Michael Blythe cautioned that the Reserve Bank would still be concerned that inflation for services was still high.
But Commonwealth Bank head of Australian economics Gareth Aird, who believes official interest rates will be cut by 0.75 percentage points this year, said the Reserve Bank was now “in the home straight” to bringing inflation back within its 2-3 per cent target.
“Monetary policy is restrictive and the arguments in favour of any further tightening are weak. We firmly believe the next move in the cash rate is down,” he said.
Despite the sharp lift in official interest rates since May 2022, the property market continues to tighten.
Data to be released today by CoreLogic shows dwelling values nationally lifted by 0.4 per cent in January, the 12th consecutive monthly increase.
Led by Perth (up by 1.6 per cent) and Adelaide (1.1 per cent), national values have increased by 8.7 per cent over the past year. Values lifted in Sydney by 0.2 per cent in the month to be 11.4 per cent higher over the year, while in Melbourne they were up by 0.1 per cent in January to be 3.9 per cent higher over the year.
The median value of a Sydney house increased by 0.3 per cent to reach $1.4 million while in Melbourne the median house value was flat at $942,000. Canberra remains the second most expensive city for a house at $968,000.
CoreLogic’s head of research Tim Lawless said high migration and a tight rental market meant people were still prepared to buy into an expensive property market.
“Despite ongoing cost-of-living pressures, high interest rates, low consumer sentiment and affordability constraints, homes are still selling,” he said.
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