Australia: Inflation unchanged and below expectations in October
Latest reading: Inflation held steady at September’s 2.1% in October, just above the lower bound of the 2.0–3.0% target band of the Reserve Bank of Australia (RBA). October’s reading was the joint-weakest since July 2021 and surprised markets on the downside. Looking at the details of the release, softer price pressures for housing and utilities plus textiles offset a softer decline in transportation costs.
Meanwhile, the trend pointed down, with annual average inflation falling to 3.3% in October (September: 3.5%). October’s result marked the lowest reading since February 2022. Inflation excluding volatile items and holiday travel dropped to 2.4% from September’s 2.7%.
Lastly, consumer prices rebounded 0.08% in monthly terms in October, contrasting September’s 0.16% decline.
Outlook: Our panel expects price pressures to accelerate from current levels in the coming quarters but remain within the RBA’s target rate. In 2025 as a whole, inflation will average around the upper bound of the target band but below 2024’s projection due to a looser labor market and tight borrowing conditions. Faster wage growth and a weaker-than-expected Australian dollar are upside risks.
Panelist insight: Sue Ann Lee, analyst at United Overseas Bank, commented:
“The decline in headline inflation will be short-lived due to the temporary nature of the subsidies, which include a one-year federal government-funded electricity bill discount of AUD300. The RBA expects headline inflation to jump back to 3.7% late next year when the federal and state government rebates expire.”