The Australian Bureau of Statistics (ABS) launched the most recent – Shopper Worth Index, Australia – for the March-quarter 2025 at this time (April 30, 2025). The information confirmed that the inflation price rose by 0.9 factors within the quarter however over the 12 months was secure at 2.4 per cent . The inflation price has been throughout the RBA’s inflation focusing on vary for the final 9 months and inflationary expectations are all throughout the vary. There are not any important wage pressures evident. Utilizing the RBA’s personal logic, its coverage rate of interest ought to now be minimize.
The abstract, seasonally-adjusted Shopper Worth Index outcomes for the March-quarter 2025 are as follows:
| Part | Quarter % | Annual % |
| All teams CPI | 0.9 (final 0.2) | 2.4 (final 2.4) |
| Trimmed imply sequence | 0.5 (0.5) | 2.9 (3.2) |
| Weighted median sequence | 0.7 (0.5) | 3.0 (3.4) |
The next Desk exhibits the charges of inflation for the most important parts of the CPI:
| Part | December-quarter % | Final 12 months % |
| All teams CPI | 0.9 | 2.4 |
| Meals and non-alcoholic drinks | 1.2 | 3.2 |
| Alcohol and tobacco | 1.2 | 6.5 |
| Clothes and footwear | -0.8 | 1.7 |
| Housing | 1.7 | 2.0 |
| Furnishings, family tools and companies | -0.9 | 0.7 |
| Well being | 2.9 | 4.1 |
| Transport | 1.0 | -1.05 |
| Communication | 0.3 | 0.0 |
| Recreation and tradition | -1.6 | 1.7 |
| Training | 5.2 | 5.7 |
| Insurance coverage and monetary companies | 0.5 | 3.8 |
The ABS Media Launch – CPI rises 0.9% within the March 2025 quarter – famous that:
The Shopper Worth Index (CPI) rose 0.9 per cent within the March 2025 quarter and a pair of.4 per cent yearly …
… the March quarter improve of 0.9 per cent follows two quarters in a row of 0.2 per cent rises …
Trimmed imply annual inflation was 2.9 per cent within the March quarter, down from 3.3 per cent within the December quarter. That is the bottom annual trimmed imply inflation price for the reason that December 2021 quarter …
The primary contributors to the quarterly CPI rise of 0.9 per cent had been Housing (+1.7 per cent), Training (+5.2 per cent) and Meals and non-alcoholic drinks (+1.2 per cent).
The quarterly development in Housing was pushed by Electrical energy (+16.3 per cent) …
… the influence from the Commonwealth Power Invoice Reduction Fund (EBRF) rebates was decrease within the March quarter in comparison with the December quarter because of the timing of rebate funds.
Training costs elevated 5.2 per cent this quarter, following the beginning of the college 12 months …
Observations:
1. The annual inflation price stays regular.
2. The primary drivers mirror value gouging by personal training suppliers and personal well being care suppliers – which demonstrates the folly of supporting personal training and privatised well being care.
3. The fiscal assist supplied by the federal authorities to offset the worth gouging by electrical energy corporations, which has been a really efficient anti-inflationary coverage, is now being withdrawn and so electrical energy costs are rising quicker than the overall value stage. The coverage put paid to the notion that defeating a supply-side inflationary spiral requires fiscal austerity.
4. Additional proof of the constructive fiscal impact is the impact of the adjustments in Commonwealth Rental Help, which has diminished the escalation in rental inflation.
5. The hire inflation is moderating as rates of interest have began to fall. The inflation was largely pushed by the RBA’s personal price hikes as landlords in a good housing market have been passing on the upper borrowing prices – so the so-called inflation-fighting price hikes had been a major pressure in driving inflation.
This graph exhibits that the general inflation price peaked within the December-quarter 2022 and has been steadily declining ever since.
Nonetheless, rental inflation lagged the rise in general inflation in 2021 and actually solely took off after the RBA began mountaineering rates of interest.
As soon as the RBA ended its present mountaineering cycle, the rental inflation has stabilised and is now falling.
Developments in inflation – Regular
During the last 12 months, the inflation price was 2.4 per cent (regular).
The height was within the December-quarter 2022 when the inflation price was 7.8 per cent.
The next graph exhibits the quarterly inflation price for the reason that December-quarter 2005.
The following graph exhibits the annual headline inflation price for the reason that first-quarter 2002. The shaded space is the RBA’s so-called targetting vary (however learn beneath for an interpretation).
What’s driving inflation in Australia?
The next bar chart compares the contributions to the quarterly change within the CPI for the March-quarter 2025 (blue bars) in comparison with the December-quarter 2024 (inexperienced bars).
Observe that Utilities is a sub-group of Housing and are considerably impacted by authorities administrative selections, which permit the privatised corporations to push up costs every year, often effectively in extra of CPI actions.
The influence of fiscal coverage on that sub-group by way of the electrical energy rebates has clearly been important, which fits to indicate that governments can reasonable inflation by way of expansionary fiscal coverage if the drivers are from the supply-side.
It additionally demonstrates that financial coverage is ineffective in coping with such a inflation.
As famous above, one of many main contributors, Training, is being pushed by profit-gouging within the personal training sector.
The following graph exhibits the contributions in factors to the annual inflation price by the varied parts.
The ABS famous that:
Electrical energy costs rose 16.3 per cent this quarter. This follows falls of 17.3 per cent within the September quarter and 9.9 per cent within the December quarter because of the introduction of the second spherical of the Commonwealth Power Invoice Reduction Fund (EBRF) rebates from July 2024, which was expanded to incorporate all households.
The rise this quarter was anticipated as most households in Brisbane have used up the $1,000 Queensland State authorities electrical energy rebate leading to increased out of pocket electrical energy prices. Some households within the remaining states and territories additionally noticed will increase within the quantities payable on their electrical energy payments this quarter in comparison with final quarter. This was because of the influence from the Commonwealth EBRF rebates being decrease within the March quarter in comparison with the December quarter because of the timing of rebate funds …
Excluding the rebates, Electrical energy costs would have risen 0.4% this quarter as retailers in some capital cities elevated provide and utilization prices or decreased reductions for market provide plans.
The following graph is taken from the ABS and exhibits the influence of fiscal coverage in lowering the inflation price.
EBRF refers back to the authorities’s Power Invoice Reduction Fund.
Inflation and Anticipated Inflation
The next graph exhibits 4 measures of anticipated inflation produced by the RBA from the December-quarter 2005 to the December-quarter 2023.
The 4 measures are:
1. Market economists’ inflation expectations – 1-year forward.
2. Market economists’ inflation expectations – 2-year forward – so what they assume inflation shall be in 2 years time.
3. Break-even 10-year inflation price – The typical annual inflation price implied by the distinction between 10-year nominal bond yield and 10-year inflation listed bond yield. It is a measure of the market sentiment to inflation threat. That is thought of probably the most dependable indicator.
4. Union officers’ inflation expectations – 2-year forward – this sequence hasn’t been up to date for the reason that September-quarter 2023.
However the systematic errors within the forecasts, the worth expectations (as measured by these sequence) at the moment are falling or are regular.
The Break-even 10-year inflation price and the Market economists’ inflation expectations 2-year forward the expectations stay effectively throughout the RBA’s inflation focusing on vary (2-3 per cent) and are declining.
So the RBA can’t declare that fears of accelerating expectations are stopping them from chopping rates of interest additional.
Implications for financial coverage
What does this all imply for financial coverage?
The Shopper Worth Index (CPI) is designed to mirror a broad basket of products and companies (the ‘routine’) that are consultant of the price of dwelling. You’ll be able to study extra concerning the CPI routine HERE.
The RBA’s formal inflation focusing on rule goals to maintain annual inflation price (measured by the buyer value index) between 2 and three per cent over the medium time period.
Nonetheless, the RBA makes use of a variety of measures to establish whether or not they consider there are persistent inflation threats.
Please learn my weblog put up – Australian inflation trending down – decrease oil costs and subdued economic system (January 29, 2015) – for an in depth dialogue about the usage of the headline price of inflation and different analytical inflation measures.
The RBA claims it doesn’t depend on the ‘headline’ inflation price.
As a substitute, they use two measures of underlying inflation which try and internet out probably the most risky value actions.
The idea of underlying inflation is an try and separate the pattern (the persistent element of inflation) from the short-term fluctuations in costs.
The primary supply of short-term ‘noise’ comes from “fluctuations in commodity markets and agricultural circumstances, coverage adjustments, or seasonal or rare value resetting”.
The RBA makes use of a number of completely different measures of underlying inflation that are usually categorised as ‘exclusion-based measures’ and ‘trimmed-mean measures’.
So, you’ll be able to exclude “a specific set of risky objects – specifically fruit, greens and automotive gasoline” to get a greater image of the “persistent inflation pressures within the economic system”.
The primary weaknesses with this methodology is that there will be “giant non permanent actions in parts of the CPI that aren’t excluded” and risky parts can nonetheless be trending up (as in power costs) or down.
The choice trimmed-mean measures are common amongst central bankers.
The authors say:
The trimmed-mean price of inflation is outlined as the common price of inflation after “trimming” away a sure proportion of the distribution of value adjustments at each ends of that distribution. These measures are calculated by ordering the seasonally adjusted value adjustments for all CPI parts in any interval from lowest to highest, trimming away people who lie on the two outer edges of the distribution of value adjustments for that interval, after which calculating a mean inflation price from the remaining set of value adjustments.
So that you get some measure of central tendency not by exclusion however by giving decrease weighting to risky components. Two trimmed measures are utilized by the RBA: (a) “the 15 per cent trimmed imply (which trims away the 15 per cent of things with each the smallest and largest value adjustments)”; and (b) “the weighted median (which is the worth change on the fiftieth percentile by weight of the distribution of value adjustments)”.
So what has been taking place with these completely different measures?
The next graph exhibits the three most important inflation sequence printed by the ABS for the reason that December-quarter 2009 – the annual proportion change within the All objects CPI (blue line); the annual adjustments within the weighted median (inexperienced line) and the trimmed imply (crimson line).
The newest information for the three measures exhibits:
| Part | Quarter % | Annual % |
| All teams CPI | 0.9 (final 0.2) | 2.4 (final 2.4) |
| Trimmed imply sequence | 0.7 (0.5) | 2.9 (3.2) |
| Weighted median sequence | 0.7 (0.5) | 3.0 (3.4) |
The next graph exhibits the evolution of those sequence since 2009.
Tips on how to we assess these outcomes?
1. The RBA’s most well-liked measures at the moment are inside their focusing on vary.
2. There isn’t any wages strain coming from the labour market.
3. Inflationary expectations are benign or falling.
4. All the indications assist an additional minimize within the coverage rate of interest.
Conclusion
The newest CPI information confirmed that the annual inflation price is secure and is firmly throughout the RBA’s inflation focusing on vary with no indicators of an acceleration pending.
All the indications assist an additional minimize within the coverage rate of interest.
That’s sufficient for at this time!
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