The monthly consumer price index (CPI) indicator from the Australian Bureau of Statistics (ABS) rose by 7.4 per cent in the year to January 2023.
The inflation indicator, which was released by the ABS on Wednesday, came in well below market expectations for a 8.0 per cent rise amid a pull back in holiday travel prices during the month.
“This month’s annual increase of 7.4 per cent is lower than the 8.4 per cent rise for the year to December 2022,” commented ABS head of prices statistics Michelle Marquardt.
“It is, however, the second highest annual increase since the start of the monthly CPI indicator series in September 2018, signifying ongoing high inflation.”
Treasurer Jim Chalmers said that the government welcomed indications from the monthly CPI indicator that suggest inflation peaked towards the end of last year.
“Inflation remains the defining challenge for our economy in 2023. While we are cautiously optimistic it has peaked, it will still be higher than we would like for longer than we would like,” The Treasurer said.
“We are focused on addressing inflation with responsible cost‑of‑living relief, repairing our broken supply chains, and demonstrating spending restraint in the budget – and we’re building the resilience of the economy to withstand future economic shocks.”
According to the ABS, the most significant contributors to the annual increase in inflation were housing, food and non-alcoholic beverages, and recreation and culture.
“The annual increase for the housing group in January (+9.8 per cent) was lower than December (+10.1 per cent). The key contributors to this change were new dwellings and rents,” Ms Marquardt explained.
“In monthly terms, both new dwelling (+0.5 per cent) and rents (+0.7 per cent) prices rose. However, rents are growing more strongly than they were 12 months ago while the increases in new dwelling prices are moderating compared to a year ago.”
Meanwhile, prices for food and non-alcoholic beverages rose 8.2 per cent annually, lower than the 9.5 per cent annual increase seen in December.
“On a monthly basis most food and non-alcoholic beverages prices rose. The main exception was fruit and vegetables which fell in price (-2.3 per cent),” said Ms Marquardt.
Prices for the recreation and cultural group were said to have remained elevated in the year to January, primarily due to holiday travel and accommodation rising 17.8 per cent for the year to January, which was down from 29.3 per cent for the year to December.
“Airfares and holiday accommodation prices tend to be quite variable, and this month is no exception. On a monthly basis holiday travel and accommodation prices fell 7.2 per cent in January following a rise of 29.3 per cent in December,” Ms Marquardt stated.
Reacting to the data release, eToro market analyst Josh Gilbert said that a decline in inflation well below forecasts is exactly the result the Reserve Bank (RBA) would have wanted.
“The data may also mean that the central bank might feel it does not need to be as aggressive with its tightening for the rest of this year,” he noted.
“However, this result is unlikely to divert the RBA from handing down another 25-basis-point hike in March, given that the inflation fight isn’t over yet and is still well off the RBA’s 2 per cent target.”
Meanwhile, the ABS also pointed out that CPI inflation is often impacted by items with volatile price change such as fruit and vegetables, automotive fuel and holiday travel.
“It can be helpful to exclude items with volatile price change from the headline CPI figure to provide a view of underlying inflation. In the case of the monthly CPI indicator, when excluding holiday travel, the annual movement was a rise of 6.7 per cent in January, compared to 7.4 per cent in December,” Ms Marquardt added.
