Inflation Eases Amid Energy Subsidies: Mixed Reactions Prevail

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
Author: Paige Estritori
Sources

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

Share this news item:

Finance News

Clear

New Partnership Offers Discounted Loans for Hyundai and Kia Electric Vehicles

09 Mar 2026: Paige Estritori

The Clean Energy Finance Corporation (CEFC) has announced a partnership with Hyundai Capital Australia (HCAU) to offer discounted financing options for eligible Hyundai and Kia electric vehicles (EVs). This initiative aims to reduce the upfront costs associated with EV ownership, making it more accessible for Australian households and small businesses. - read more

ASIC Identifies Concerning Practices in Australia's Car Finance Sector

09 Mar 2026: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has conducted a comprehensive review of the motor vehicle finance sector, uncovering significant issues that raise concerns about consumer protection and responsible lending practices. - read more

Surge in Used Hybrid Car Sales Reflects Australia's Shift Towards Sustainable Transportation

09 Mar 2026: Paige Estritori

The Australian automotive market is witnessing a notable increase in the sales of used hybrid vehicles, indicating a growing consumer preference for sustainable yet practical transportation options. - read more

ASIC Calls for Improved Standards in Car Finance Lending

01 Mar 2026: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has conducted a comprehensive review of the motor vehicle finance sector, uncovering significant concerns regarding lending practices. This examination has highlighted issues such as exorbitant establishment fees and a troubling rate of early loan defaults, raising questions about the adequacy of current lending standards. - read more

MONEYME's Strategic Move: $455 Million Boost for Autopay's Growth

01 Mar 2026: Paige Estritori

In a significant development within Australia's auto finance sector, non-bank lender MONEYME has successfully priced a $455.4 million asset-backed securitisation (ABS) for its secured car loan product, Autopay. This transaction marks the company's second major auto bond deal, following a $517.5 million transaction earlier in the financial year, underscoring MONEYME's rapid expansion and growing influence in the market. - read more

New Low-Interest Loans to Accelerate Electric Vehicle Adoption

21 Feb 2026: Paige Estritori

In a significant move to promote the adoption of electric vehicles (EVs) among Australian consumers, the federal government has announced a new loan scheme designed to make EVs more accessible and affordable. This initiative aims to reduce the financial barriers associated with purchasing electric cars, thereby encouraging a shift towards more sustainable transportation options. - read more

Decline in Australia's Used Car Market: Sales and Listings Down

21 Feb 2026: Paige Estritori

The Australian Automotive Dealer Association (AADA), in collaboration with AutoGrab, has released the November 2025 Automotive Insights Report (AIR), revealing a significant downturn in the used car market as the year concludes. - read more

Click for more Finance News