Data released for November shows the cost of living is rising more slowly than before, but not enough to clearly rule out another rate increase in the months ahead.
Inflation rose 3.4 per cent over the year to November, down from 3.8 per cent in October. This easing was stronger than many economists expected and suggests some pressure on household budgets may be starting to ease. A key measure of underlying inflation, which strips out the most volatile price movements, also edged lower to 3.2 per cent. Even so, inflation remains above the RBA’s preferred range, meaning families are still paying noticeably more for everyday essentials than they were a year ago.
For many Australians, housing costs remain the biggest pain point. Housing was the largest contributor to inflation in November, with prices up more than 5 per cent over the year. Rent increases and the high cost of building or renovating homes continue to strain household finances, particularly for renters and first-home buyers already dealing with high interest rates. Food prices also climbed, while transport costs rose at a slower pace.
There was some good news on electricity bills. Price growth slowed sharply compared with October, easing some pressure on household energy costs after months of steep increases. Services inflation, which includes things like travel and recreation, also cooled after being pushed higher during the school holiday period.
The big question for Australians is what this means for interest rates. Mortgage holders are watching closely, as another rate rise would further lift repayments already stretched by previous increases. Financial markets currently see a real possibility of a rate hike as early as February, though it is far from certain. Some major banks believe the RBA will hold rates steady, while others think a modest increase may still be needed to keep inflation under control.
The central bank has warned that inflation remains too high and that progress back toward its target is not guaranteed. From its perspective, acting too late could allow prices to rise again, while acting too soon risks slowing the economy further and putting more pressure on households.
Australians will get more clarity before the next RBA meeting, with further inflation data due at the end of January. Until then, families and businesses are left balancing cautious optimism with the reality that cost-of-living pressures and interest rate uncertainty are not yet behind them.
Contact Accountancy Insurance
We would love to hear from you.
About Accountancy Insurance
Thousands of accounting firms offer our tax audit insurance solution, Audit Shield to their clients.
Find out why.