Economists Express Caution Despite Drop in Australia’s Inflation Rate

Australia’s inflation rate has slowed to 2.8 percent, marking its lowest level since March 2021 and returning to the Reserve Bank’s target range for the first time in three years.
This drop is largely attributed to lower petrol prices and cost-of-living assistance measures aimed at easing household financial burdens.
“Such a result indicates that while the annual pace may drop from 3.9 percent in the June quarter to 3.5 percent, it still reflects persistent inflationary pressures in essential sectors,” he stated.
Analysts attribute the decline in the overall inflation figure to falling petrol prices and government support, but the increase in housing costs—particularly rents—continues to pose challenges.
“Our base case remains for the RBA to start cutting rates in February next year, but we can’t rule out a December cut if the numbers align,” Oliver remarked.
RBA is expected to hold a meeting next week to discuss a revision on interest rates.
While global central banks have begun to ease monetary policy amid slowing inflation rates, Oliver pointed out that Australia’s inflationary pressures may not be worse than those elsewhere. Instead, Australia’s inflation likely peaked later, suggesting that it may take longer to return to lower levels.
While acknowledging that cost-of-living support measures may temporarily lower prices, the IMF warned that these initiatives could also stimulate broader economic activity, potentially complicating the inflation landscape.
The IMF report highlighted the recent tax cuts aimed at increasing disposable income for households, raising concerns about the broader economic implications of such measures.