Inflation Eases Amid Energy Subsidies: Mixed Reactions Prevail

6

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

This monthly CPI report will be the last inflation update before the RBA's upcoming cash rate meeting on September 24. Analysts are cautious, however, indicating that the marginal CPI dip might not be enough to sway a rate cut in September. The subsequent monthly update and more comprehensive quarterly data are due later this year, shedding more light on inflation trends.

The Australian Bureau of Statistics (ABS) identified a significant contributor to the CPI fall: the federal government's $300 energy bill relief fund. This subsidy slashed household electricity costs, up to $75 per quarter, rolling out first in Western Australia and Queensland, with other states to follow.

Warren Hogan, chief economist at Judo Bank, lauded the subsidy’s immediate impact on cost reduction but pointed out its temporary nature. "Government interventions like these offer short-term relief but don’t address the underlying issue," Mr. Hogan told Sky News. "They might help with living costs now, but inflate long-term expectations."

Mr. Hogan also noted, "Without factoring in the rebate, inflation remains stagnant. Homeowners awaiting rate cuts might be disappointed unless unforeseen circumstances prompt the RBA."

David Bassanese, Betashares' chief economist, agreed the subsidy likely reduced inflation by about 0.2%, cautioning that electricity prices may rebound once the subsidy phase ends. "The RBA isn't likely deceived by these temporary fixes. Sustained reduction in underlying inflation is essential before they consider altering the cash rate," Bassanese remarked.

On the contrary, Treasurer Jim Chalmers stood by the subsidies, emphasizing their role in reducing living costs and countering inflationary pressures. "Assistance with electricity bills is neither artificial nor insignificant-our approach is yielding tangible benefits in curbing inflation," Chalmers argued.

However, Shadow Treasurer Angus Taylor criticized the government's performance, pointing out persistent high costs in housing, food, and transport. "Despite superficial gains, Australia’s inflation is still alarmingly high compared to global counterparts," Taylor remarked. He called on the government for more substantive measures to address "the root of the inflation challenge."

According to ABS acting head of price statistics, Leigh Merrington, volatile items like fuel and fresh produce often distort CPI figures. Excluding such variables, July's underlying inflation stood at 3.7%, a modest drop from June's 4.0%. Still above the RBA’s 2-3% target, these readings fuel mixed feelings about imminent rate cuts. While some anticipate a pre-Christmas cash rate reduction, others, including RBA Governor Michele Bullock, counsel patience.

During August’s rate meeting, Bullock maintained rates at 4.35%, stressing that tackling stubborn inflation remains paramount. “We aim for a narrow path to lower inflation without sparking a recession. Many Australians are struggling, but curbing inflation is essential for long-term economic stability,” Bullock reiterated.

Financial experts and homeowners alike await the forthcoming data releases, which will potentially shape the economic trajectory in coming months. Originally sourced from the August 2024 article in NCA NewsWire by Jessica Wang.

Published:Thursday, 29th Aug 2024
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Finance News

Clear

ANZ Bank's $160 Million Fine Highlights Regulatory Compliance Failures

09 Nov 2025: Paige Estritori

In a landmark decision, ANZ Bank has agreed to pay a record-breaking A$240 million (approximately US$160 million) fine for a series of serious regulatory breaches. This penalty underscores the growing emphasis on compliance and accountability within Australia's financial sector. - read more

ASIC's Comprehensive Review of Australia's Motor Vehicle Finance Sector

01 Nov 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has commenced a thorough review of the motor vehicle finance sector, focusing on strengthening consumer protections and ensuring industry compliance with responsible lending obligations. This initiative aims to address potential risks and improve the experiences of borrowers across Australia. - read more

Australian EOFY Car Deals Hit Record Highs in 2025

01 Nov 2025: Paige Estritori

The 2025 End of Financial Year (EOFY) period witnessed an unprecedented surge in car deals across Australia, marking a significant milestone in the automotive industry. According to an analysis by TheBeep.com.au, the number of car deals in June 2025 reached 190, representing a 39% increase from the 137 deals recorded in 2024. This substantial growth underscores the intensified competition among automotive brands striving to clear stock before the June 30 deadline. - read more

EV and Hybrid Vehicle Financing in Australia Reaches $6.17 Billion in 2024

01 Nov 2025: Paige Estritori

The Australian automotive finance sector has experienced a remarkable surge in support for electric (EV) and hybrid vehicles, with financing volumes escalating from $250 million in early 2023 to an impressive $6.17 billion by the end of 2024. This substantial growth underscores the pivotal role of financial institutions in facilitating the nation's transition to low-emission transportation. - read more

Affordable Electric Vehicles: New Low-Interest Loans for Eligible Australians

24 Oct 2025: Paige Estritori

The Australian government has launched a new initiative to make electric vehicles (EVs) more accessible to a broader segment of the population. This program offers low-interest loans to individuals earning less than $100,000 annually, as well as essential workers, facilitating the purchase of new and used EVs priced up to $55,000. - read more

RBA Weighs Additional Rate Cuts Amid Economic Indicators

16 Oct 2025: Paige Estritori

The Reserve Bank of Australia (RBA) is currently evaluating the necessity of further interest rate cuts in light of recent economic developments. Following three reductions earlier this year, bringing the cash rate to 3.6%, the central bank is closely monitoring indicators such as consumer spending and inflation trends to inform its monetary policy decisions. - read more

Navigating Car Loan Approval Timelines in Australia

16 Oct 2025: Paige Estritori

Securing a car loan is a pivotal step for many Australians aiming to purchase a vehicle. Understanding the approval process and the time it takes can help set realistic expectations and facilitate a smoother experience. - read more

Click for more Finance News