CPI Rise to 2.3% in November Signals Steady Inflation Trends Within RBA’s Target

The CPI rose by 2.3% year on year in November 2024, only slightly above the previous month’s 2.1%. Nonetheless, inflation remained within the RBA's target range of between 2 and 3 percent despite a rise.

CPI Shows Signs of Moderating Inside RBA's Target Range

Slightly higher than October's 2.1%, the Australian Consumer Price Index (CPI) noted in November 2024 a 2.3% annual increase. Despite this rise, inflation is within the 2-3% target range of the Reserve Bank of Australia (RBA)

The growth in food, drinks, and leisure influenced the performance of this index mostly using price movement.

Effect of Important Price Movement Case-by-case

Rising contributors were food and non-alcoholic drinks (2.9%); alcohol and tobacco (6.7%); recreation and culture (3.2%). Reductions are somewhat offset by cuts in car fuel (-10.2%) and power costs (-21.5%).

Consumer Spending Patterns Affecting CPI Increase

Higher food and beverage costs as well as rising rates in the categories of recreation and cultural expenditure helped to explain the small rise in November's Consumer Price Index (CPI). Still, inflation usually stayed within the Reserve Bank of Australia's goal ranges, implying some economic stability. Given the recent decrease in trimmed mean inflation, analysts think the RBA will probably turn to this as the route it may follow given prospective rate cuts in the not-too-distant future.

Trimmed mean inflation shows a positive trend.

In November, trimmed mean inflation, which excludes volatile goods like food and gasoline, decreased further. The reduction from 3.5% to 3.2% suggests that basic inflationary pressures are gradually easing.

The need for discounts on electricity

Available data show that October and November saw a notable change in the mechanisms of the power subsidies. The effect changed depending on the different dates of allocation, as it caused certain houses to have a temporary drop in the power bill. The whole catalogue also shows a notable general drop in inflation.

Experts Weigh In: A Balanced Outlook

 APAC economist at State Street Global Advisors, as core inflation approaches the RBA's goal. However, experts like Callam Pickering from Indeed stressed that much more has to be done by the services industry before rates can be reduced.

Progressive Change 

Some analysts refer to Bendigo Bank's David Robertson, who would fervently propose that inflation statistics must calm down more before any final rate reductions are taken. Based on improvements in this data, good evidence points to economists projecting a possible rate reduction in May 2025 depending on better labour market statistics and a reduction of service inflation as further expected. 

Now the emphasis should be on guaranteeing long-term gains after RVA restores inflation to goal limits. For instance, even if most recent statistics are positive, the RVA would not move strongly on interest rates until signals from the longer run become apparent.

Looking to Stay Ahead of Inflation Trends?

With CPI on the rise and inflation gradually returning to target, OM Financials is here to help you make educated judgments about the economy and financial strategy.

Contact OM Financials immediately for personalized advice on how to manage the future of your wealth and guard against future volatility!