November CPI defies market expectations

Data released from the Australian Bureau of Statistics (ABS) has revealed that the monthly Consumer Price Index (CPI) for November rose 4.3 per cent in the 12 months to November 2023.

November’s annual increase is down from the 4.9 per cent rise recorded in October, marking the smallest annual rise since January 2022.

According to the ABS, the main drivers behind the November annual increase were housing at 6.6 per cent, followed by food and non-alcoholic beverages (4.6 per cent), insurance and financial services (8.8 per cent), and alcohol and tobacco (6.4 per cent).

ABS head of prices statistics Michelle Marquardt said: “CPI inflation is often impacted by items with volatile price changes like automotive fuel, fruit and vegetables, and holiday travel. It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation.

“When excluding these volatile items from the monthly CPI indicator, the annual rise in November was 4.8 per cent, lower than the annual rise of 5.1 per cent in October.”

New dwelling prices were higher in November when compared to the month prior, rising 5.5 per cent compared to the 4.7 per cent annual movement in October, despite the rate of price growth easing steadily since the 21.7 per cent recorded in July 2022.

Additionally, rent prices rose 7.1 per cent in the 12 months to November that reflected ongoing low vacancy rates and a persistently tight rental market.

“The increase in Commonwealth Rent Assistance has reduced out-of-pocket rent costs for eligible tenants since its introduction on 20 September 2023. Excluding these changes to rent assistance, rents would have increased 8.8 per cent over the year to November 2023,” Ms Marquardt said.

The November CPI data returned lower than what was expected by bank economists, with the Commonwealth Bank of Australia (CBA) expecting an increase of 4.4 per cent, while Westpac pencilled in an increase of 4.5 per cent.

ANZ senior economist Catherine Birch said the October and November CPI prints “make it difficult” for the fourth quarter CPI inflation to exceed the Reserve Bank of Australia’s forecast of 1 per cent q/q, thus further supporting the major bank’s stance of no cash rate change in February.

“Looking ahead, we expect quarterly CPI to be annualising within the RBA’s 2–3 per cent target band in the second half of this year, opening the door for a shallow easing cycle to start in late-2024,” Ms Birch added.

“Housing appears to be the category most likely to slow the ongoing decline in inflation, with rental vacancy rates remaining very low, housing construction costs picking up again, and the waning effect of government credits on electricity prices.”

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