Australia: Inflation edges up as expected in December
Latest reading: Inflation rose to 2.5% in December from 2.3% in November, which was in line with market expectations and the mid-point of the 2.0–3.0% target band of the Reserve Bank of Australia (RBA). Looking at the details of the release, rebounding transport prices and a faster increase in housing costs outweighed softer price pressures for food and textiles.
Meanwhile, the trend was unchanged, with annual average inflation stable at November’s 3.1% in December. December’s result marked the joint-lowest reading since February 2022. The annual trimmed mean—a closely watched measure of core inflation by the RBA—dropped sharply to 2.7% in December from 3.2% in November, entering the Central Bank’s target range for the first time in three years.
Lastly, consumer prices rose 0.16% in monthly terms in December, decelerating from November’s 0.48% increase.
Outlook: Our panelists anticipate inflation to slow in H1 2025 towards the lower bound of the RBA’s target band but to then pick up due to a fading high base of comparison and healthier domestic demand. In 2025 as a whole, price pressures should average within target for the first time in four years, tempered by tight monetary policy and a looser labor market. Faster wage growth and larger-than-expected interest rate cuts remain upside risks.