Australia experiences a welcome drop in core inflation, fueling speculation about an interest rate cut and driving the ASX to new heights. While the cost of living remains a concern, the positive economic outlook suggests a path towards recovery.
Core inflation for the December quarter has slowed to 3.2 percent — the lowest since late 2021 — according to the Bureau of Statistics. This positive development has fueled hopes of an interest rate cut by the Reserve Bank of Australia (RBA). Meanwhile, the Australian Securities Exchange ( ASX ) has surged in early trade, recovering from a recent sell-off spurred by the DeepSeek shock. Wall Street's rebound has also contributed to the ASX 's gains, pushing it closer to its all-time high.
This optimistic economic outlook comes despite persistent concerns about the rising cost of living. While prices are showing signs of easing, many Australians are still grappling with significant increases in everyday expenses. The Treasurer has acknowledged the impact of inflation on households, stating that the cost of living has risen by over 10 percent since the Labor government came to power. For working families, the increase is even more pronounced, at around 18 percent. Economists predict that it will take until 2030 for the Australian standard of living to return to pre-inflation levels. Despite these challenges, the government remains hopeful about the future. The lower-than-expected inflation figures have intensified speculation about an early to mid-April election, potentially coinciding with an anticipated interest rate cut in February.The Australian government is also working towards presenting a budget in March. However, uncertainty surrounding the election date could potentially delay this. While acknowledging the need for caution, the Treasurer expressed confidence that Australia can effectively manage inflation and interest rates without resorting to significant job losses. He pointed to the encouraging trend of headline inflation falling within the RBA's target band and underlying inflation remaining in the low three percent range. These positive indicators suggest that Australia is on track to navigate the current economic challenges successfully
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