The annual inflation rate held steady at 2.1% in October — below analysts’ consensus forecast of 2.3% and at the lower end of the Reserve Bank of Australia’s (RBA) 2% to 3% target.
However, this provides no guarantees of a near-term rate cut as the RBA’s preferred inflation measure, the trimmed mean, of 3.5% remained above the central bank’s target range.
Electricity and fuel prices fall
September’s 2.1% consumer price index (CPI) figure marked the first month inflation had dipped into the central bank’s target range since March 2021. A Reuters poll, published before the October data was released, predicted CPI would rise by 2.3% in the 12 months to October.
However, the Australian Bureau of Statistics data showed Australia’s inflation rate remained at 2.1% in the year to October — a three-year low. This is down from 3.8% in June with the decline attributed to significant price falls in electricity and automotive fuel.
Electricity fell 35.6% in the 12 months to October, the largest annual fall in the electricity series ever recorded in the CPI. Automotive fuel prices fell 11.5% over the past 12 months after repeated price falls in recent months.
ABS head of prices statistics Michelle Marquardt said: “Annual inflation was steady at 2.1% in October and remains the lowest annual inflation since July 2021.
“The falls in electricity and fuel had a significant impact on the annual CPI measure this month.”
Annual inflation for food and non-alcoholic beverages was steady at 3.3% in October. Fruit and vegetables rose 8.5% in the 12 months to October driven by lower supply of avocados, berries and vegetables like cucumber and broccoli.
What about the trimmed mean?
One of the key measures of underlying inflation and the preferred inflation measure of the RBA – the trimmed mean, which strips out volatile aspects including electricity and fuel – rose slightly to 3.5% annually in October and is still outside the RBA’s 2-3% target.
“When prices for some items move by large amounts, measures of underlying inflation like the CPI excluding volatile items and holiday travel, and the Trimmed mean can provide additional insights into how inflation is trending,” Marquardt said.
“Annual trimmed mean inflation was 3.5%, up from 3.2% in the previous month and similar to where it was in August.”
The RBA has previously said that it expects trimmed mean inflation, which excludes volatile price movements, to remain above its target until late 2025.
Marquardt added, “The CPI excluding volatile items and holiday travel was 2.4% in the 12 months to October, down from 2.7% in September.”