At 11:30 am on Wednesday, the Australian Bureau of Statistics (ABS) released the third quarter consumer price index (CPI). Data shows that in the three months from June to September, inflation rate rose 1.8%, with an annualized growth rate of 7.3%, the highest level in 32 years, and there is no sign of slowing down. There are even more terrifying details in the data released by the Bureau of Statistics: the inflation increase has reached three times the wage increase. This means that the cost of living has risen at a rate far exceeding the wage income level of residents, and continues to put huge pressure on residents' living pressure.
Not only that, the core inflation rate (trimmed means), that is, the inflation rate after excluding the commodity with the largest price fluctuations in , also soared to 6.1%, which not only far exceeded economists' expectations 5.6%, but also exceeded the RBA's expectations (6% peaked), and became the highest level on record.
All-category Consumer Price Index Increase (the curve is annualized change, and the column is quarterly change), data: ABS
All-category inflation vs core inflation, data source: ABS
So, two major problems facing Australia now have also surfaced:
- The Australian Ministry of Finance (Treasury) and the RBA (RBA) expect inflation to peak before the end of the year (7.75%) and fall back to 3.5% in 2023. Is this prediction basically invalid? When the RBA announced its interest rate resolution on October 4, the RBA had lowered the interest rate hike from 50 basis points to 25 basis points, and became the first major economy among the G20 to turn pigeons (moderate interest rate hike). Will it be another stupid move?
Just after the data was released, the Australian dollar showed its biggest increase in recent times, with Australian dollar against the US dollar (AUDUSD) rebounding nearly 6% from the annual lowest level 0.616 two weeks ago to 0.651 near . This is also the reflection of the optimistic sentiment brought by the capital market that the RBA raised interest rate hikes to 50 basis points again on the next interest rate resolution on November 1.
Australian dollar against US dollar (AUDUSD)
However, the continued out-of-the-box inflation has not brought any optimistic signals to the Australian economy and the pressure of life of residents.
data shows that the projects with the largest price increase are the prices of new houses, food prices and energy prices (mainly gas).
new house price
annualized increase is as high as 21%, and the increase even exceeded the sharp increase during the period when Australia launched the Goods and Services Tax (GST) in 2000. The main reasons are still that the global supply chain has not yet recovered and the local labor shortage in Australia. The sharp rise in building materials prices and labor prices will naturally drive construction costs and new house prices to rise.
In addition, the Australian government has consumed a lot of funds during the fight against the epidemic, and as estimated in the latest fiscal budget, Australian national debt will exceed 1 trillion Australian dollars in 2024, so the government has not introduced any construction subsidies in the near future, which is also one of the main reasons for the rise in new home prices.
food price
From the global food crisis that broke out in the first half of this year to the natural disaster that occurred locally in Australia in recent months, it has caused a heavy blow to the food supply side, and prices have also risen.
out-of-town catering expenses rose by 2.9% - NSW's Dine & Discover NSW allowance, Victorian Dining and Entertainment Program allowance in Victorian Dining and Entertainment Program have played a certain role in mitigating. The allowance has now ended, so the out-of-town catering expenses are expected to continue to rise in the next data.
Vegetable prices have risen 16.2% - the impact of floods in recent times by NSW, Victoria and Queensland.
dairy products prices rose 12.1% - milk prices rose sharply.
Bread and cereal prices rose by 10%.
meat and seafood prices rose 7.3%.
non-alcoholic beverage prices rose by 9.3%.
In addition, supermarket chain giant Coles also issued a warning that the current supply of fresh food has dropped by as much as 8.8% compared with the same period last year, and prices are expected to continue to rise in the future.
energy price
The continued conflict between Russia and Ukraine, the damaged Nord Stream natural gas pipeline and Europe, which is entering winter, are increasing demand for the global natural gas market, and the rise in international energy prices.
The "fuel excise" launched by the former Liberal government in March also ended at the end of September, so car fuel prices are also expected to continue to rise in the fourth quarter.
real estate price
In the environment where living costs and mortgage costs are rising simultaneously, housing prices in most parts of Australia have also cooled down significantly.
According to AFR reporter Nila Sweeney, data from Domain Real Estate Services, Australian real estate prices hit the most rapid decline ever in the third quarter.
However, in an interview, the chief economic analyst of Domain Group was still optimistic: "The worst is over... We see that the RBA has begun to lower the pace of interest rate hikes. The interest rate environment at the end of the year and in the coming year will become mild, and the auction clearance rate and consumer confidence will also rebound."
Future interest rate
Unfortunately, just yesterday afternoon, the four major Australian banks raised their outlook for the future interest rate environment, believing that RBA will raise interest rates by 50 basis points in the interest rate resolution next Tuesday. Among them, the Federal Bank (CBA) and Westpac (WBC) believe that the Fed's official interest rate will reach a peak of 3.85%, which is still 125 basis points (1.25%) from the current 2.60%.
Westpac chief analyst Bill Evans said:
"
Australian inflation rose very rapidly in the third quarter. Only 2 of the 11 categories (garment and commuting) showed a slight decline, and the remaining nine major categories rose across the board... Such an increase has been compared with the mining outbreak period 10 years ago (mining) The situation brought by boom) is even more difficult, with only 63% of the categories rising at that time... Therefore, we expect the next round of interest rate hikes to rise to 50 basis points again.
”
It is worth noting that there is another detail in Westpac's forecast, that is, the official interest rate will remain at 3.85% by the end of 2023. It can be seen that the inflation problem faced by Australia has not improved, but is moving towards Europe and the United States in a big stride.
Inflation and Budget
So, what is the relationship between the budget announced on Tuesday evening and the rising inflation and the quality of life of Australian residents?
First of all, as Finance Minister Chamos said, since inflation has been at a decades high, the federal government can basically no longer use fiscal policies to stimulate an already overheated economy. This means that the rate of economic development of will continue to decline in the next year.
Secondly, most of the major benefits in the budget come from policies that benefit the people, such as childcare (A$4.7 billion), paid maternity leave (A$530 million), gender equality and drug subsidies. It can be seen that the direction of the federal government is still to reduce the cost of living for residents.
Therefore, the Australian economy may face great downward pressure within the next year.
But it is not all bad news. With the influx of millions of overseas population (data from the Immigration Bureau), population growth and labor force increase are also expected to bring more momentum to Australia's real estate and economy, minimizing the negative impact of the global economic recession on Australia.
