Like elsewhere in the world, inflationary pressures in Australia dropped the in three months to September. Core inflation rose by 0.5% on quarter, in line with expectations but still the equal-lowest level seen since Q1 2012, with the annual rate dropping back to 2.55% from a downwardly-revised 2.7% increase in Q2.
Reflecting the weakness in the core figure, headline inflation rose 0.5% over the quarter, higher than the 0.4% increase expected, although, with stronger data rolling off the data series, the annual rate dipped to just 2.3%, the lowest level seen since Q3 2013. Tradable (internationally-exposed) and non-tradable (domestic) inflation recorded quarterly increases of 0.3% and 0.5% respectively with annual rates slowing to 2.0% and 2.4% from 2.9% and 3.1% in Q2.
With the up-trend in core inflation now broken and with price growth now in the centre of the RBA’s target band, it’s clear that the door for future rate cuts from the RBA remains ajar. Should we see investment in the established property market cool in the months ahead, there is a very real chance that the next move by the RBA will be down, not up, should concerns surrounding global growth materialise.