Price current around 6pm AEDT
That will be it from me today. Thank you for sending through so many questions. I'm really sorry I couldn't get to everyone.
For dinner tonight, I won't be having a $45 steak. It will be a glass of water and some paper wisdom.
You heard it here first - our own business editor Michael Janda is giving you permission to be stingy this holiday season.
Why? Read on:
Diana Mousina, AMP's deputy chief economist, has circulated a good note today.
Here's what she's noticed about inflation in Australia relative to comparable countries:
"A lot has been said about how Australian inflation fares compared to our global peers with commentators including the RBA indicating that Australia still has further to go on the inflation battle.
"But after today’s data, the difference between Australian inflation and the rest of the world has narrowed.
"Core inflation is only slightly above global peers [see the first chart below] and headline inflation is in the range with global peers [see the second chart below]."
She also thinks that, according to AMP's Inflation Pipeline Indicator, there's probably more downside to inflation from here.
"We think by the end of the year, trimmed mean inflation will be at 3.3% (RBA at 3.5%) and headline at 2.8% (RBA at 3%)," she says.
"Today’s data is consistent with the RBA keeping the cash rate unchanged at 4.35% for now.
"While the labour market is holding up very well, the slowing in inflation should allow for rate cuts to commence from February 2025 as economic activity will remain subdued, employment growth is likely to soften and the unemployment rate should trend up a little from here."
She says despite the complications from the government’s electricity rebates, a component analysis shows that a lot of biggest drivers to inflation in the past 12 months (which have mostly been services) appear to have peaked and should slow from here, especially across the services sector.
"Administered prices, which are influenced by government policies are running at 3.7% over the year but market prices are up by 2.5% over the year to September – smack bang in the RBA’s 2-3% inflation target," she says.
Also, she says there is now a larger share of items in the basket with inflation running below 2% over the year (at 51%) compared to items with inflation above 3% (at 35%).
The Aussie share market has closed lower after a day in the red following the release of quarterly inflation figures. Weakness in energy and financial stocks partially offset gains in iron ore miners.
The ASX 200 closed 0.83% lower to 8180 points and the All Ordinaries was -0.78% at market close.
All sectors were in the red except education and real estate.
Here are the best and worst performers:
Hi Gillian,
It wouldn't be fair to say the RBA is unconcerned about our GDP and potential for recession.
It's obviously concerned about it. It's even been copping flak from some of the macho economists out there who want to see a recession to see inflation fall.
As things stand, according to the National Accounts, the economy has grown by 1 per cent over the last year (to the end of the June quarter) (see the graph below).
Excluding the COVID-19 pandemic period, the annual rate of economic growth is now the slowest since 1991-92.
The RBA knows this.
But the RBA also doesn't control everything. It doesn't control immigration, or policies impacting the tertiary sector, or any of it.
There are some economists who want to RBA to cut now, but they don't seem to be in the majority. And the economic teams in the Big Four banks are all on the same page now. They reckon we won't see rate cuts until early next year.
As we've reported, food inflation remained at 3.3% on an annual basis — unchanged from the previous quarter.
That came as no surprise to Jonathan Rowatt, the director of a bar and bowling alley in the suburbs of Melbourne.
With all the price increases, Mr Rowatt said he'd have to charge $45 for a steak or $35 for a parma to make a profit, but he can't as he believes customers won't pay that at a venue like his, so his margins are thin.
Read more here:
Hi CovidBryant,
The RBA is deliberately taking this course.
It has said that, given Australia's inability to drive the unemployment rate down low in the years leading up to the 2020 pandemic, it would really like to "lock in" the employment gains we made during the lockdown period.
It hasn't wanted to jack rates higher, engineer a recession, and see unemployment shoot higher, to get inflation down.
It's betting that it can get inflation back into the 2-3% target range, without seeing unemployment rise too much, by engineering an orderly slowdown in economic activity.
Other countries have seen inflation come down quicker, but with worse employment and growth outcomes.
Here you go Ron.
Your first comment belongs in a fortune cookie. If I cracked that open above my sweet-n-sour pork, I'd stop eating and stare into the distance.
Hi Vincent,
Here's a thought experiment: can you see Australia having the same institutional arrangements for fighting inflation in 2100? And if you can't, what kind of arrangements do you think we'll have by then, and why?
That kind of experiment reveals how you think about things, and what kind of imagination you have.
76 years is a long time. Scientists are increasingly warning about climate change and the devastating impact it will have on our societies this century. One assumes that some of our institutions will have to change as the world changes. Will that include our current inflation-targeting set-up? Who knows.
When it comes to how the RBA arrived at its 2-3% target range, that's another matter. Former governors have said it came about after a lot of deep thinking and discussions with experts.
But earlier this year, John Quiggin, an economist from Queensland, had this interesting tidbit to tell about our cousins in New Zealand who adopted an inflation target before us:
The first central bank to adopt an inflation target was the Reserve Bank of New Zealand in 1989. The policy was introduced by the then Reserve Bank governor, Don Brash, later to reinvent himself as a rightwing (and then far-right) politician. Brash was backed by then finance minister, Roger Douglas, whose political career followed a similar trajectory.
A range of 0% to 2% was picked, without any theoretical basis, as the lowest that could plausibly be pursued. As Douglas said later, “I just announced it was gonna be 2%, and it sort of stuck.” While the NZ central bank was the first to adopt a 2% inflation target, others were quick to follow. The most important shift was by the US Federal Reserve, which also chose a 2% target, while initially avoiding a public commitment.
Those passages come from this piece (which was printed in the Guardian):