The central bank plans to consider interest rates in April.
A day after treasurer Jim Chalmers praised Australia’s economic recovery and the “soft landing” of his budget speech, fresh inflation data from the Australian Bureau of Statistics (ABS) strengthened his trust.
The latest Consumer Price Index (CPI) figures show that headline inflation slowed to 2.4%, down from 2.5% in January, and now sits within Australia (RBA) target range of 2-3%.
“After stabilizing at 2.5% over the past two months, annual CPI inflation has been slightly lower in February,” said Michel Marquhart, ABS’s head of price statistics.
Core inflation, which removes volatile items, fell from 2.9% to 2.7%, but the cropped average, the preferred measure of the underlying inflation of the RBA, also fell to 2.7%.
This downward trend could encourage debate about potential interest rate reductions as the central bank plans to consider interest rates in April.
Homes and energy prices cause slowdowns
Key contributors to mitigating inflation include falling electricity prices and slow rental growth.
According to the data, housing inflation was eased to 1.8% in February, down from 2.1% in January due to a decline in electricity prices, primarily related to the rebate of the Victoria Federal Energy Bill Relief Fund.
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Rental prices also slowed to 5.5%, the lowest since March 2023, in line with the increase in vacancy rates.
The weakest growth rate since May 2021 rose just 1.6%, as builders introduced discounts and incentives.
Electricity prices fell 2.5% nationwide, while Victoria’s rebates contributed to a 13.2% decline per year.
However, without the government rebates, prices would have declined, according to ABS.
“Excluding all federal and state government rebates, electricity prices would have fallen 1.2% in the 12 months to February,” Marquardt said.
Chalmers vs. Opposition party
Chalmers welcomed the data and called it “more positive and promising news that we are making progress together in the fight against inflation.”
He noted that both headlines and underlying inflation have fallen below the RBA’s target midpoint for several months.
“The budget we took over this week continues to fight inflation, indicating that the Treasury expects inflation to not end and will return to sustainability six months earlier by the middle of this year,” he said.
But Shadow Treasurer Angus Taylor dismissed the government’s optimism, claiming that Australians have fallen 8% over the past two and a half years.
“The Reserve Bank governor calls it homemade, with grocery prices increasing by 30%, energy prices (GAS and electricity) over 30%, insurance premiums, mortgage costs and more,” Taylor said.
Although inflation is easing amid the living crisis, debate over economic management continues.
