CPI shows signs of easing, but rent increases highlight need for housing supply

The latest Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS) shows that while inflation rose 1.0 per cent in the March 2024 quarter, it has slowed to 3.6 per cent over the past twelve months, marking the fifth consecutive quarter of lower annual inflation since the peak of 7.8 per cent in the December 2022 quarter.

Real Estate Institute of Australia (REIA) President, Leanne Pilkington, said, “Australia appears to be experiencing the same final hurdles as the USA in getting inflation back into the target range.”

The trimmed mean, which excludes large price rises and falls, was 4.0 per cent for the year, down from 4.2 per cent in the December quarter, marking the fifth consecutive decrease in this analytical series. Services inflation, which has been a concern for the Reserve Bank of Australia (RBA), eased for the third consecutive quarter to 4.3 per cent, down from 4.6 per cent in December and a peak of 6.3 per cent in June 2023.

However, the most significant quarterly price rises were in rents, which increased by 2.1 per cent, secondary education (6.1 per cent), tertiary education (6.5 per cent), and medical and hospital services (2.3 per cent). Rents rose 7.8 per cent annually, the highest since March 2009, highlighting the need to address housing supply and maintain private investment in the sector.

Pilkington noted, “The highest increase in rents in fifteen years highlights the need to address supply and the need to keep private investors adding to that supply by not tinkering with current taxation arrangements.”

The CPI data, along with other economic indicators such as rising unemployment, suggests a slowing economy. Pilkington believes that the slight increase in the quarterly figure is a blip in the final steps to control inflation and that, as in the USA, it doesn’t necessarily mean that interest rates won’t decrease, but rather that a little more patience is required.