A convincing slowdown in consumer price growth suggests inflation could be back within the Reserve Bank’s target range earlier than expected.
The Melbourne Institute monthly inflation gauge grew 4.4 per cent over the 12 months to November, 0.7 percentage points lower than the 5.1 per cent annual lift to October.
Monthly inflation as tracked by the gauge – which uses the same methodology as the Australian Bureau of Statistics’ consumer price index but is released on a more timely schedule – lifted 0.3 per cent.
This followed a 0.1 per cent fall in October.
The authors of the monthly report said the sharp fall in annual inflation upped the chances of inflation coming back within the two-three per cent target range before 2025.
The Reserve Bank of Australia has been lifting interest rates to wrangle inflation back to target by late 2025, based on its latest forecasts.
The central bank is widely expected to stay on hold when it meets on Tuesday for the final interest rate call of 2023.
While the central bank has kept the door open to further tightening in this cycle, a softer set of monthly inflation and retail sales data from the national statisticians have most economists forecasting no change in December.
This will mean the cash rate will stay at 4.35 per cent.
The labour market has started to weaken in another sign interest rates are slowing the economy as intended, with job ads as tracked by ANZ and Indeed recording their sharpest monthly fall since June 2018, barring the pandemic.
The 4.6 per cent decline in November followed a 3.4 per cent in October.
But ANZ economist Madeline Dunk said the series was still “very high” compared what what was historically typical.
She said the RBA’s tightening to date was likely doing enough to reduce inflationary pressures coming from the labour market.
“We expect the number of job ads to moderate as the impacts of this tightening cycle continue to show up in the labour market,” she said.
Asked if the labour market was weakening more quickly than anticipated, Treasurer Jim Chalmers said it was resilient but “softening around the edges”.
He told reporters on Monday an uptick in unemployment was expected by Treasury and the Reserve Bank.
“It’s not a surprise to us, but we do enter a new period of global economic uncertainty, and the impact of all these rate rises, from a position of genuine strength,” he said.
“And one of the places that’s most obvious has been in the incredible performance of the labour market in recent months.”
Dr Chalmers, Social Services Minister Amanda Rishworth and Indigenous Australians Minister Linda Burney also hosted an inaugural investment dialogue to help disadvantaged children on Monday.
It brought together some of Australia’s biggest philanthropic donors in a bid to secure more investment to deal with youth disadvantage, particularly during early childhood.
Ms Rishworth said the government could not tackle entrenched disadvantage on its own.
“Establishing firm partnerships between government, philanthropy and with communities … will help us to tackle the pockets of entrenched disadvantage that exist,” she said.
“We owe it to all Australians, and particularly Australia’s children, to tackle entrenched disadvantage in our communities.”