But inflation pressures remain. Rents have climbed by 7.6 per cent over the past 12 months,insurance and financial service prices have increased by 8.5 per cent while electricity costs are up by 15.7 per cent.
Power prices in July alone jumped by 6 per cent. If not for the federal government’s energy rebate program,they would have risen by 19.2 per cent.
The RBA board meets next week at what will be Lowe’s last meeting in charge. His successor,Michele Bullock,on Tuesday evening saidgetting inflation down to the RBA’s 2-3 per cent target band was her primary focus.
“We may have to lift interest rates again,but we’re watching the data very carefully and we’ll be taking decisions for the time being,until next year at least,month by month,” she said.
But after the inflation figures,most economists now believe Bullock will have to start planning for when the Reserve Bank starts to cut interest rates.
EY senior economist Paula Gadsby said inflation for services,over which the Reserve Bank had expressed concern,was also slowing.
She said the bank was unlikely to lift interest rates at its meeting next week.
“This cooling is further evidence that rate hikes are working,and the Reserve Bank will be pleased with its piloting of the economy towards a soft landing. Whether or not that soft landing is accomplished remains to be seen,” she said.
KPMG chief economist Brendan Rynne said if the monthly inflation result was annualised,overall inflation was even lower at 3.6 per cent.
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He said the figures confirmed inflation was continuing its “march” on a downward trajectory.
“Combined with the weakening in household consumption and retail trade data,as well as signs of softening in the labour market,we are now starting to see the effects of the monetary tightening to date,” he said.
AMP senior economist Diana Mousina said inflation was falling faster than expected in Australia and around most other developed nations in response to the aggressive tightening of monetary policy by central banks.
She said on top of the recent rise in unemployment,no sign of a wages breakout,ongoing weakness in housing construction and softness for economic growth,the Reserve Bank would not be lifting interest rates further.
“We still see the risk of rate cutsin 2024,” she said.
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