More good news for anyone still paying attention. The latest consumer price index (CPI) indicators shows inflation is continuing to abate. It was at 5.4% in June, but over the year to July the price rise over the last year is down to 4.9%. That’s actually less than the minimum wage decision of 5.75% meaning some people are getting ahead! Wow!
The mellow results send a cool breeze through our central bank. The nervous central banker can relax a little: we are following America down. US inflation is down to around 3% and ours is headed in the same direction. The rate hike frenzy is almost certainly over at this point. Official rates of 4.1% are looking like our top, for now at least. Markets are pricing in basically no change at all in the next 18 months.
What comes next could be a very disappointing time for Reserve Bank (RBA) board meeting junkies. A generation has been classically conditioned to tremble with dread and excitement on the first Tuesday of the month. Their dopamine receptors may have to learn to do without. New RBA boss Michele Bullock is likely to lead the bank through a dull, dry desert of stability after she takes over following the expiration of the current governor’s term in mid-September.
(Unless China implodes. That is looking much less impossible than it did a month ago. Its financial sector is full of bad loans. While the government has been adept at shifting them around so they don’t blow up or don’t do damage when they do, all good things come to an end. It is unclear if the rumblings we are hearing now are the start of a proper Chinese financial crisis, but if they are, hold onto your hats).
So where’s your money going?
Inflation has fallen. That doesn’t mean prices are going down. They’re still going up. Inflation is like acceleration: if you’re accelerating more slowly, your speed is still going up.
So what’s moving where? Some price falls in the year to July were in fruit and vegetables and fuel; these are volatile series. Indeed fuel has gone up again since the data was collected, unfortunately.
Holiday travel is getting cheaper again too as airlines start to put on more flights. Which is not to say travel is cheap right now. Far from it.
Prices are going to stabilise a bit. But whether we’re talking about fuel, holidays or food, it will still take us a long time to get used to them being at this new higher level.
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