Australia's core inflation has fallen to its lowest level in three years, prompting optimism for an interest rate reduction by the Reserve Bank of Australia. The Australian share market, ASX, experienced a notable surge as Wall Street recovered from the DeepSeek shock sell-off. While acknowledging the positive inflation figures, Treasurer Jim Chalmers cautioned that cost of living pressures persist for Australian households.
Core inflation for the December quarter has slowed to 3.2 per cent — 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) and contributed to a surge in the Australian share market. The ASX has risen in early trade after stocks caught up in the DeepSeek shock sell-off recovered on Wall Street.
Treasurer Jim Chalmers, while acknowledging the positive inflation figures, cautioned that the cost of living pressures remain significant for Australian households. He highlighted the substantial increase in the price of everyday goods and services since the Labor government came to power, emphasizing the ongoing pain for families. Despite the drop in inflation, Chalmers stressed the need for continued vigilance and conservative fiscal policies.Deloitte's report suggests that it may take until 2030 for the Australian standard of living to recover to pre-Labor government levels. Meanwhile, the RBA is expected to make its first decision on interest rates in 2025. The lower-than-expected inflation data is likely to intensify speculation about an early to mid-April election, potentially coinciding with an anticipated interest rate cut in February. The government maintains its commitment to a March budget, although an April election could shift this timeline. Discussions around the budget's potential surplus, despite forecasts of a return to deficit, remain ongoing
INFLATION INTEREST RATES ASX RESERVE BANK OF AUSTRALIA COST OF LIVING BUDGET ELECTION
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ASX Surges as Core Inflation Drops to Lowest Level in Three YearsThe Australian share market is experiencing a strong rally, driven by a recovery on Wall Street and a significant decline in core inflation. The Bureau of Statistics reported that core inflation fell to 3.2 percent for the December quarter, its lowest point in three years. This development has fueled speculation about an imminent interest rate cut by the Reserve Bank of Australia (RBA). The ASX has rebounded strongly, particularly after a recent sell-off related to the DeepSeek shock. The positive performance on Wall Street has further contributed to the upward trend. While lower inflation is encouraging, some economists caution against expecting a rapid recovery in the cost of living. Deloitte predicts that it could take until 2030 for the Australian standard of living to reach pre-Labor government levels. The RBA will carefully assess economic indicators, including inflation, before making any decisions on interest rates. The upcoming budget is also facing uncertainty due to speculation about an early election.
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