2024 is shaping up to be an eventful year for the Australian economy. Inflation continues to be a theme, particularly given the Reserve Bank’s (RBA) focus on bringing CPI growth to its 2%-3% p.a. target range. In January, the RBA published a report based on the pricing experiences and expectations of 80 firms across a range of industries. They found that the median increase in prices across these firms in the 12 months to September 2023 was 7%, and the median increase in prices forecast by these firms over next 12 months (from September 2023) was 4%. Services based industries were found to have the highest forward looking price growth expectations, at approximately 5%.
Notably, firms stated that cost pressures had largely driven the previous price increases, and negative changes in demand is why they anticipated price growth to fall. Importantly, while the report was published in January, it was based on data collected last September. Between then and now, there have been additional developments reported.
For example, the CommBank Household Spending Insights Index retreated by -3.9% in December 2023. A sharp decline in a single month, and this news may have influenced the way firms answered the RBA’s survey, had the survey been conducted in January 2024 as opposed to September 2023. CommBank reports that 8 of the 12 spending categories declined, with Household Goods declining the most (-12%).
Also reported in January, the RBA acknowledged the consumption growth over the year. According to the RBA, “many households are experiencing acute challenges in the face of high inflation and higher interest rates” and “many individual households…are experiencing significant financial pressure”.
While no doubt this is a challenge for many individuals, this is likely to flow through to lower levels of inflation and in-turn be a consideration for the RBA as they make their interest rate decisions in 2024.
Cost-of-living pressures continue to command a lot of media and political bandwidth. The Albanese Government announced late in January that upcoming Stage III tax cuts will be focussed on providing relief to middle and low-income brackets. If successful, this should provide relief to many households, however, economists warn that too much “relief” could hamper progress made in bringing inflation under control.
At the end of January, we saw very positive inflation news, with the Australian Bureau of Statistics reporting that the Consumer Price Indicator rose 3.4% in the 12 months to December 2023. This is less than half the rise reported in the previous calendar year which saw CPI grow 8.4% over the 12 months to December 2022. On a quarterly basis CPI rose by 0.66% in the December 2023 quarter, a fraction of the 2.78% quarterly rise to December 2022. If we annualise the December 2023 quarterly figure, it equates to 2.66% which, interestingly, is within the RBA’s target range. Should inflation remain at or around similar levels for the entirety of 2024, shifts in future monetary policy decisions may arise.
Closer to home, investors in the Trilogy Industrial Property Trust are reminded that the 2024 Interim Withdrawal Offer is open to applications, more information can be found here.
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