5 reasons why Australia's inflation rate will not follow the US uptick
Kanebridge News
Share Button

5 reasons why Australia’s inflation rate will not follow the US uptick

The latest US inflation figures came in hotter than expected

By Bronwyn Allen
Tue, Apr 16, 2024 2:09pmGrey Clock 2 min

Inflation in Australia is unlikely to follow last week’s surprising uptick in the United States, according to AMP deputy chief economist Diana Mousina. US inflation increased 0.4 percent in March, pushing the yearly inflation rate to 3.5 percent, up from 3.2 percent in February. This is well above the US Federal Reserves 2 percent target, and prompted analysts to push back their predictions on the timing of a US interest rate cut. The official US cash rate range is currently 5.25 to 5.5 percent.

Australian and US inflation are now at similar levels. Our annual inflation rate is currently 3.4 percent, as per the monthly report for February. The rate was the same in January. Ms Mousina said Australian inflation peaked in December 2022, which was about six months after the US economy. While analysts have been watching US trends ever since for insights as to what may happen here, Ms Mousina said it was unlikely that Australia would also record an uptick in inflation for March.

we think Australian inflation will see a further slowing from here, unlike the recent pattern in the US, Ms Mousina said. There are five key reasons for this, starting with how domestic conditions in the US and Australia have been impacted differently by monetary policy. Firstly, most US home loans are on long-term fixed interest rates. Most Australian mortgages are on variable rates, so mortgage repayments have lifted considerably and eaten into household budgets for living expenses.

US outstanding mortgage rates have risen by 0.5 percentage points, compared to 3.2 percentage points in Australia. This is despite Australia increasing interest rates by 1 percent less than the US. As a result, households are in worse shape in Australia than the US.

Ms Mousina said retail trading, real household disposable income and consumer confidence were down in Australia but rising in the US. A softer consumer weighs on spending and inflation,” she said.

Ms Mousina also said high US wages growth was keeping services inflation elevated. Australian wages growth has also increased, to its highest level since 2009, but is likely to taper off from here. “… the unemployment rate is expected to lift as labour demand has slowed,” she said. Softer wages growth in 2024 will see a softening in services inflation.

Prices in regular US price surveys have recently recorded an uptick, while prices in Australia have been trending down. Additionally, Australian pipeline inflation pressure, which gives a four-month lead on inflation trends, continues to head lower. Pipeline pressure is measured using energy and agricultural commodities prices, shipping rates, price surveys, advertised salaries on Seek and the China Producer Price Index. “… when we look at our Australian pipeline indicator, there is still a further slowing in inflation likely to occur, whereas progress in the US inflation indicator has stalled,” Ms Mousina said.

The last reason why Australia is unlikely to record an uptick in inflation is technical differences in the measurement of inflation between the two countries. The US CPI data has a high weighting to housing at 33 percent, including both rents and ‘owners equivalent rentwhich reflects property values. In Australia, only rents are included in the CPI index, with a weighting of just 5.8 percent. Both rents and owners equivalent rent have had high inflation in the US,” she said. “If Australia had a higher weighting to rents, then services inflation would remain higher for longer, as very elevated Australian population growth is keeping rental inflation high.



MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

Related Stories
Property
‘Are There Any Parisians Left?’ The Olympics Have Residents Fleeing the City.
By KATE TALERICO 26/07/2024
Lifestyle
Alexa Is in Millions of Households—and Amazon Is Losing Billions
By DANA MATTIOLI 24/07/2024
Lifestyle
Is ‘Rizz’ the Secret to Getting Ahead at Work?
By Rachel Feintzeig 22/07/2024
‘Are There Any Parisians Left?’ The Olympics Have Residents Fleeing the City.
By KATE TALERICO
Fri, Jul 26, 2024 4 min

As Paris makes its final preparations for the Olympic games, its residents are busy with their own—packing their suitcases, confirming their reservations, and getting out of town.

Worried about the hordes of crowds and overall chaos the Olympics could bring, Parisians are fleeing the city in droves and inundating resort cities around the country. Hotels and holiday rentals in some of France’s most popular vacation destinations—from the French Riviera in the south to the beaches of Normandy in the north—say they are expecting massive crowds this year in advance of the Olympics. The games will run from July 26-Aug. 1.

“It’s already a major holiday season for us, and beyond that, we have the Olympics,” says Stéphane Personeni, general manager of the Lily of the Valley hotel in Saint Tropez. “People began booking early this year.”

Personeni’s hotel typically has no issues filling its rooms each summer—by May of each year, the luxury hotel typically finds itself completely booked out for the months of July and August. But this year, the 53-room hotel began filling up for summer reservations in February.

“We told our regular guests that everything—hotels, apartments, villas—are going to be hard to find this summer,” Personeni says. His neighbours around Saint Tropez say they’re similarly booked up.

As of March, the online marketplace Gens de Confiance (“Trusted People”), saw a 50% increase in reservations from Parisians seeking vacation rentals outside the capital during the Olympics.

Already, August is a popular vacation time for the French. With a minimum of five weeks of vacation mandated by law, many decide to take the entire month off, renting out villas in beachside destinations for longer periods.

But beyond the typical August travel, the Olympics are having a real impact, says Bertille Marchal, a spokesperson for Gens de Confiance.

“We’ve seen nearly three times more reservations for the dates of the Olympics than the following two weeks,” Marchal says. “The increase is definitely linked to the Olympic Games.”

Worried about the hordes of crowds and overall chaos the Olympics could bring, Parisians are fleeing the city in droves and inundating resort cities around the country.
Getty Images

According to the site, the most sought-out vacation destinations are Morbihan and Loire-Atlantique, a seaside region in the northwest; le Var, a coastal area within the southeast of France along the Côte d’Azur; and the island of Corsica in the Mediterranean.

Meanwhile, the Olympics haven’t necessarily been a boon to foreign tourism in the country. Many tourists who might have otherwise come to France are avoiding it this year in favour of other European capitals. In Paris, demand for stays at high-end hotels has collapsed, with bookings down 50% in July compared to last year, according to UMIH Prestige, which represents hotels charging at least €800 ($865) a night for rooms.

Earlier this year, high-end restaurants and concierges said the Olympics might even be an opportunity to score a hard-get-seat at the city’s fine dining.

In the Occitanie region in southwest France, the overall number of reservations this summer hasn’t changed much from last year, says Vincent Gare, president of the regional tourism committee there.

“But looking further at the numbers, we do see an increase in the clientele coming from the Paris region,” Gare told Le Figaro, noting that the increase in reservations has fallen directly on the dates of the Olympic games.

Michel Barré, a retiree living in Paris’s Le Marais neighbourhood, is one of those opting for the beach rather than the opening ceremony. In January, he booked a stay in Normandy for two weeks.

“Even though it’s a major European capital, Paris is still a small city—it’s a massive effort to host all of these events,” Barré says. “The Olympics are going to be a mess.”

More than anything, he just wants some calm after an event-filled summer in Paris, which just before the Olympics experienced the drama of a snap election called by Macron.

“It’s been a hectic summer here,” he says.

Hotels and holiday rentals in some of France’s most popular vacation destinations say they are expecting massive crowds this year in advance of the Olympics.
AFP via Getty Images

Parisians—Barré included—feel that the city, by over-catering to its tourists, is driving out many residents.

Parts of the Seine—usually one of the most popular summertime hangout spots —have been closed off for weeks as the city installs bleachers and Olympics signage. In certain neighbourhoods, residents will need to scan a QR code with police to access their own apartments. And from the Olympics to Sept. 8, Paris is nearly doubling the price of transit tickets from €2.15 to €4 per ride.

The city’s clear willingness to capitalise on its tourists has motivated some residents to do the same. In March, the number of active Airbnb listings in Paris reached an all-time high as hosts rushed to list their apartments. Listings grew 40% from the same time last year, according to the company.

With their regular clients taking off, Parisian restaurants and merchants are complaining that business is down.

“Are there any Parisians left in Paris?” Alaine Fontaine, president of the restaurant industry association, told the radio station Franceinfo on Sunday. “For the last three weeks, there haven’t been any here.”

Still, for all the talk of those leaving, there are plenty who have decided to stick around.

Jay Swanson, an American expat and YouTuber, can’t imagine leaving during the Olympics—he secured his tickets to see ping pong and volleyball last year. He’s also less concerned about the crowds and road closures than others, having just put together a series of videos explaining how to navigate Paris during the games.

“It’s been 100 years since the Games came to Paris; when else will we get a chance to host the world like this?” Swanson says. “So many Parisians are leaving and tourism is down, so not only will it be quiet but the only people left will be here for a party.”

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

Related Stories
Property
China’s Housing Market Woes Deepen Despite Stimulus
By REBECCA FENG 18/06/2024
Property
Bats, Asbestos, a Leaky Roof: This English Estate Proved to be the Ultimate Fixer-Upper
By RUTH BLOOMFIELD 20/06/2024
Local
The best restaurants in Potts Point
By Josh Bozin 25/06/2024
0
    Your Cart
    Your cart is emptyReturn to Shop