Australia’s February Inflation Comes in Lower Than Expected
The monthly consumer-price index indicator rose 3.4% in the 12 months to February
The monthly consumer-price index indicator rose 3.4% in the 12 months to February
SYDNEY—Australia’s monthly inflation indicator came in below expectations in February, signalling that price pressures would likely continue to retreat over coming months.
The monthly consumer-price index indicator rose 3.4% in the 12 months to February, according to the latest data from the Australian Bureau of Statistics. Economists had expected a rise in February of 3.5% on year.
Some economists had expected the monthly CPI update to show a bigger rise, fuelled by services inflation which remains an area of concern for the Reserve Bank of Australia.
The better-than-expected inflation outcome will also help offset some of the uncertainty about the outlook for interest rates that arose in financial markets following news last week of a sharp drop in unemployment in February.
The most significant contributors to the February annual increase were housing costs, which climbed 4.6% on year, while food and nonalcoholic beverages rose 3.6% in the same period.
Alcohol and tobacco prices were up 6.1% and insurance and financial services rose 8.4%, the ABS said Wednesday.
Excluding volatile items from the data, the annual CPI rise in February was 3.9%, down from 4.1% in January.
Annual inflation excluding volatile items has continued to slow over the last 14 months from a high of 7.2% in December 2022, the ABS said.
Rents increased 7.6% for the year to February, up from 7.4% in January, reflecting a tight rental market and low vacancy rates across the country.
New dwelling prices rose 4.9% over the year with builders passing through higher costs for labor and materials. Annual new dwelling price increases have been around the 5% mark the past six months, the data showed.
The 3.6% rise in food prices in the 12 months to February was down from the 4.4% in January. It was the lowest annual growth since January 2022.
Insurance costs jumped 16.5% over the past 12 months to February, with rises in premiums across all insurance types due to higher reinsurance, natural disaster and claim costs, the ABS said.
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Money worries are having a cascading effect on stress levels, conflict and even the rate of ageing
Worrying about the cost of living is causing accelerated ageing, household arguments and creating significant stress, according to new research. More than half of Australians say they have experienced personal setbacks due to financial strain over the past year. Almost 20 percent say that have suffered a stress-related illness, 33 percent have lost sleep and almost one in five are seeing signs of early ageing.
Household hostility is also rising, with 19 percent of Australians admitting they have argued with their partners about money, and a further one in 10 have argued with family and friends.
The Finder survey of 1,070 Australians reveals women are bearing the brunt of financial stress, with 62 percent reporting they have worried about money compared to 42 percent of men.
Younger Australians are struggling the most, with almost 7 in 10 Gen Z respondents reporting financial strain compared to 58 percent of Gen Xers and 24 percent of baby boomers.
The impact of cost-of-living pressures among different age groups and income levels is reflected in new data from the Australian Bureau of Statistics (ABS). The selected living cost indexes show employee households are under more strain from inflation, with the CPI measure for this population group at 6.5 percent today compared to the official overall CPI figure of just 3.6 percent.
The discrepancy is due to higher mortgage interest payments – which make up a higher proportion of expenditure for employee households — as well as an increase in primary and secondary school fees, and the indexation of tertiary education fees at the start of the year. The official CPI does not include mortgage payments, so the living cost indexes provide a more accurate picture of how rising interest rates are impacting households with mortgages today.
The inflation rate is much lower for older Australians, who have often paid off their mortgages. The inflation rate on living expenses for age pensioner households is below the official CPI level at 3.3 percent, and it’s only slightly higher at 3.4 percent for self-funded retirees.
Graham Cooke, head of consumer research at Finder, said that despite cooling inflation, Australians were still under significant financial pressure.
“This can be seen in Finder’s Cost of Living Pressure Gauge, which has been hovering in the extreme range for the past year and a half,” Mr Cooke said. The gauge returned a reading of 78 percent in March this year compared to 47 percent in March 2021, when inflation was 1.1 percent and the Reserve Bank’s official cash rate was 0.1 percent.
Interestingly, Australians’ cash savings are higher today than they were in 2021, likely reflecting stimulus payments received and saved during the pandemic. The Reserve Bank has cited pandemic savings as a factor in keeping mortgage arrears low despite much higher interest rates. The Finder research shows Australians have an average of $37,206 in cash savings today, up from $24,928 two years ago.
“Money concerns can cause problems in your everyday life and snowball quickly if you don’t get them under control,” Mr Cooke said. “Building financial resilience is as vital as ever as costs continue to rise. Pay close attention to where your money is going so you keep impulse spending to a minimum, and don’t overspend.”
Australians appear to be heeding this advice, with the latest ABS retail figures showing seven straight quarters of declining per capita spending. “Per capita volumes show retail turnover after the effects of inflation and population growth have been accounted for,” explained Ben Dorber, ABS head of retail statistics. “Following an unprecedented seven straight falls, it is very clear how much consumers have pulled back on spending in response to cost of living pressures over the past two years.”
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