Inflation figures this week have probably stopped the Reserve Bank from further interest rate rises, but the economy on Jim Chalmers’ watch is still struggling.
After he worked his way through the numbers – inflation up by 1 per cent in the quarter, increasing slightly to 3.8 per cent over the year while underlying inflation eased to its lowest rate since early 2022 – questions moved to what they would mean for the RBA.
“They will weigh all of that up along with the weakness that we’ve seen in the economy, the softening around the edges of the labour market. They’ll factor in conditions in the retail sector and all the rest of it.”And it’s “the rest of it” that meant it was only a hint of a smile on the treasurer’s face as a range of other indicators suggest the economy is struggling.
Government-mandated increases to tobacco and alcohol taxes accounted for another 11 per cent. The global lift in petrol prices contributed another 9 per cent. This week’s figures show a slowdown across all those sectors. Annual inflation for hairdressing and grooming services fell to 5.6 per cent, its lowest level since September 2022, while the quarterly result of 0.8 per cent was the lowest since the second half of 2021.Dental service prices rose 0.5 per cent in the June quarter, meals out increased by 0.6 per cent and sporting and cultural services lifted by a modest 0.2 per cent.
In volume terms, retail sales have fallen by $256 a person since the Reserve Bank started lifting rates.through the first three months of the year. Figures for the June quarter, due early next month, will be almost as weak given the drop in retail activity.While values nationally lifted in July, the 18th successive monthly rise, the pace of that increase eased. The 0.5 per cent lift in values was the smallest since December last year, while the annual pace of growth eased to a nine-month low.
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