Inflation Eases Amid Energy Subsidies: Mixed Reactions Prevail
Inflation Eases Amid Energy Subsidies: Mixed Reactions Prevail
6
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
Homeowners may find a glimmer of hope as inflation eased to 3.5% in July, revealing a slight dip from June's 3.8%, according to the latest Consumer Price Index (CPI) figures.
Despite the improvement, discussions around the Reserve Bank of Australia's (RBA) stance on the cash rate remain skeptical.
This monthly CPI report will be the last inflation update before the RBA's upcoming cash rate meeting on September 24. Analysts are cautious, however, indicating that the marginal CPI dip might not be enough to sway a rate cut in September. The subsequent monthly update and more comprehensive quarterly data are due later this year, shedding more light on inflation trends.
The Australian Bureau of Statistics (ABS) identified a significant contributor to the CPI fall: the federal government's $300 energy bill relief fund. This subsidy slashed household electricity costs, up to $75 per quarter, rolling out first in Western Australia and Queensland, with other states to follow.
Warren Hogan, chief economist at Judo Bank, lauded the subsidy’s immediate impact on cost reduction but pointed out its temporary nature. "Government interventions like these offer short-term relief but don’t address the underlying issue," Mr. Hogan told Sky News. "They might help with living costs now, but inflate long-term expectations."
Mr. Hogan also noted, "Without factoring in the rebate, inflation remains stagnant. Homeowners awaiting rate cuts might be disappointed unless unforeseen circumstances prompt the RBA."
David Bassanese, Betashares' chief economist, agreed the subsidy likely reduced inflation by about 0.2%, cautioning that electricity prices may rebound once the subsidy phase ends. "The RBA isn't likely deceived by these temporary fixes. Sustained reduction in underlying inflation is essential before they consider altering the cash rate," Bassanese remarked.
On the contrary, Treasurer Jim Chalmers stood by the subsidies, emphasizing their role in reducing living costs and countering inflationary pressures. "Assistance with electricity bills is neither artificial nor insignificant-our approach is yielding tangible benefits in curbing inflation," Chalmers argued.
However, Shadow Treasurer Angus Taylor criticized the government's performance, pointing out persistent high costs in housing, food, and transport. "Despite superficial gains, Australia’s inflation is still alarmingly high compared to global counterparts," Taylor remarked. He called on the government for more substantive measures to address "the root of the inflation challenge."
According to ABS acting head of price statistics, Leigh Merrington, volatile items like fuel and fresh produce often distort CPI figures. Excluding such variables, July's underlying inflation stood at 3.7%, a modest drop from June's 4.0%. Still above the RBA’s 2-3% target, these readings fuel mixed feelings about imminent rate cuts. While some anticipate a pre-Christmas cash rate reduction, others, including RBA Governor Michele Bullock, counsel patience.
During August’s rate meeting, Bullock maintained rates at 4.35%, stressing that tackling stubborn inflation remains paramount. “We aim for a narrow path to lower inflation without sparking a recession. Many Australians are struggling, but curbing inflation is essential for long-term economic stability,” Bullock reiterated.
Financial experts and homeowners alike await the forthcoming data releases, which will potentially shape the economic trajectory in coming months. Originally sourced from the August 2024 article in NCA NewsWire by Jessica Wang.
Published:Thursday, 29th Aug 2024 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
Australia's residential property market is on the brink of reaching a historic valuation of $12 trillion, marking a significant milestone in the nation's real estate sector. Recent data from the Australian Bureau of Statistics (ABS) indicates that the total value of Australia's 11.41 million homes increased by 2.7% in the September quarter, adding $317 billion to the market's worth. This surge brings the average price of residential dwellings to $1,045,400, reflecting the robust growth in property values across the country. - read more
In the third quarter of 2025, Australian property buyers borrowed an unprecedented $98 billion, marking a significant surge in housing finance. This substantial increase, primarily driven by investors, has raised concerns among economists about potential regulatory interventions to curb the rapid growth. - read more
Adelaide's housing market is poised for substantial growth in 2026, with forecasts predicting an increase in property values ranging from 9% to 18%. This anticipated surge positions Adelaide ahead of the national average, reflecting the city's strong market fundamentals and growing appeal among homebuyers and investors. - read more
The Australian Prudential Regulation Authority (APRA) has announced a significant policy change aimed at mitigating emerging risks in the housing market. Effective February 2026, APRA will impose a cap on high debt-to-income (DTI) home loans, limiting banks to issuing no more than 20% of new home loans with DTI ratios of six times or higher. This measure applies to both owner-occupier and investor loans, excluding new housing developments. - read more
In November 2025, Australia's housing market experienced a 1% month-on-month increase in home prices, bringing the national median value to A$888,941. This follows a 1.1% rise in October, indicating a persistent upward trend in property values. The growth was particularly pronounced in mid-sized state capitals, with Perth leading at a 2.4% increase. Sydney and Melbourne saw more modest gains of 0.5% and 0.3%, respectively. - read more
Welcome to the exciting and sometimes complex world of real estate in Australia! If you are on the cusp of purchasing your first home, you've probably heard about stamp duty. But what exactly is it? Stamp duty is a form of tax imposed by Australian states and territories on property transactions. This tax is usually a percentage of the property purchase price or market value and is a legal requirement for most property sales. - read more
Welcome to the pathway of becoming a homeowner in Australia! If you're a first-time buyer, there's a good chance you've heard of something called the First Home Owner Grant (FHOG). It's a pivotal element in the home buying conversation, and for good reason. Navigating through real estate jargon and financial assistance programs can be confusing, but understanding the FHOG can significantly impact your purchasing power and overall experience in acquiring your dream home. - read more
For potential and seasoned investors alike, the Australian property landscape offers a plethora of opportunities. Investment properties have long been a favored asset class in Australia due to the potential for capital growth and rental yield. However, diving into the property market without a solid understanding of the financial mechanics, specifically interest rates, can be akin to sailing without a compass. - read more
Mortgage stress is a common concern among homeowners worldwide, with the potential to cause significant financial and emotional strain. It often occurs when mortgage repayments consume a large portion of your income, leaving little room for other expenses and causing anxiety over financial security. The impact of not managing this stress can be far-reaching, affecting not only one's financial health but also overall wellbeing. - read more
Need Help Finding a Home Loan?
Get your free home loan eligibility assessment and compare offers tailored
specifically to your circumstances.
All finance quotes are provided free (via our secure server) and without
obligation. We respect your
privacy.
"Mastering Home Loans: Navigating the Australian Mortgage Market"
Debt Consolidation: A means empoyed to renegotiate debt. By combining loans and outstanding bills, a person can consolidate debt with a single financial institution resulting in a single monthly repayment.
