Quarterly Inflation Figures Leave RBA Decision Uncertain
In holding interest rates steady in April, the Reserve Bank (RBA) Board made it very clear that the purpose was to gather further information. Key to that information was the quarterly inflation figures. The Australian Bureau of Statistics has now released that data and the figures throw doubt on which way the RBA will go with its May decision – hold or increase.
The ABS releases the CPI data monthly but there can be seasonal factors that contribute to fluctuations in individual months. That was very evident in the effect of high price rises in holiday travel on the December figures. The quarterly figures provide a better overview.
From the peak in the December quarter, annual inflation has now fallen to 7% to the end of March. That is down from 7.8% based on the figures available for the month of February.
The ABS has released the data for both the month of March and the quarter ending March. Prices did rise for the quarter, by 1.4% which was above most forecasts. But the increase was the smallest rise for a quarter in over a year.
While the pace of increases in many sectors has slowed, some areas are still recording high rates. Indicating that inflationary pressures are still strong in the economy. While the 7% will be welcome, it must be noted that the RBA’s target is 2-3%. Inflation is still very high. The data will be considered by the RBA Board when arriving at their monetary policy decision. A decision which will then typically flow through motor vehicle finance lending.
ABS CPI Report
The ABS monthly figures for March report that the most significant contributors were Housing, Food and Furnishings and household equipment. It was the third month in a row that an easing has been recorded.
In relation to the quarterly data, Ms Michelle Marquardt, the Bureau’s head of prices statistics, said that while price rises were recorded for most goods and services, the rises were smaller than in the past quarters.
The Quarterly CPI Data reveals:-
- CPI increased 1.4% for the March quarter.
- Annual rate 7% for March, down from 7.8% for December quarter.
- Most significant increases in prices in:- Medical and hospital; Tertiary education; Gas and fuels for households; domestic travel for holidays.
- Prices rises moderated for the quarter. Goods inflation has eased but services inflation still high.
- Price increases for new dwellings continue to ease due to easing in materials supply.
- Rents posted largest increase annually since 2010.
Ms Marquardt explained that medical and hospital services prices typically increase in this quarter. Providers review their fees following the reset of the Medicare Safety Net at the beginning of the year. Health insurance premiums from some providers were increased in January. Prices rises in the tertiary education sector were explained by Ms Marquardt as fees were indexed at the beginning of the year.
As food prices continued to increase, Ms Marquardt said that the shortage of potatoes as a result of the late 2022 wet weather led to increases prices for potato crisps and frozen products. Weather events also impacted fruit prices.
Ms Marquardt highlighted the difference in goods and services inflation. Noting that the annual rate for goods of 7.6% was down on December quarter’s 9.5%. But in the services area, the annual rate of 6.1% is up on December’s 5.5%.
Vehicle Finance Interest Rates Indications and Implications
With the inflation data now released, it's crucial for new car buyers to carefully consider their finance options and secure the most affordable interest rates for their personal or business vehicle purchases. As the RBA rate decision on 2 May approaches, it is important to keep an eye on the market and its potential impact on car loan interest rates.
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By staying informed and utilizing the available resources and tools, you can make the best decision for your financial situation when purchasing a new or used vehicle, including options like tesla finance. Navigating the car financing landscape can be challenging, but with the right support and guidance from a specialist motor vehicle finance company like Jade Car Loans, you can secure the best interest rate for your needs and minimize the impact on your budget.
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