Figures from the Australian Bureau of Statistics show inflation in Australia edged slightly higher in November 2024.
The official statistician says the monthly Consumer Price Index figure rose 2.3% in the 12 months to November, up from the 2.1% rise in the 12 months to October 2024.
The top contributors to the rise were Food and non-alcoholic beverages (+2.9%), Alcohol and tobacco (+6.7%), and Recreation and culture (+3.2%) categories.
Partly offsetting the CPI rise were annual falls for Electricity (-21.5%), largely due to generous government cost-of-living power rebates, and Automotive fuel (-10.2%).
While headline inflation has been back in the Reserve Bank’s mandated 2-3% target range since August last year, the central bank has resisted cutting official interest rates from their 13-year high of 4.35% because of underlying inflation pressures.
Although the CPI headline figure ticked up slightly in November, the RBA’s preferred inflation measure - the trimmed mean - came in at 3.2% for the 12 months to November, down from 3.5% in the year to October 2024.
The Bureau of Statistics describes the annual trimmed mean as “an alternative measure of underlying inflation that reduces the impact of irregular or temporary price changes.”
AMP Chief Economist, Shane Oliver, said the fall in trimmed mean inflation was “more than expected … supporting the case for a rate cut as early as February.”
The Board of the Reserve Bank will hold its first monetary policy meeting of 2025 on the 17th and 18th of February.
Dr Oliver said the more complete December quarter inflation figures, which will be released by the Bureau of Statistics on the 29th of January, are now “the key” to whether the RBA will finally begin to start bringing interest rates down in February.
Shortly after the inflation data was released, Bloomberg reported financial markets were now pricing in a 78% chance of a rate cut in February.
Commenting on the inflation numbers, the Federal Treasurer, Dr Jim Chalmers, insisted the independent Reserve Bank would make its own decisions on interest rates.
But he still issued a none-too-subtle message to the central bank that he thinks a rate cut is overdue.
“The last three months [inflation] has been at the lower half of the RBA’s target ... I think that is a statement of fact, that is what we see in the figures today. The Reserve Bank will come to its own decisions,” he told journalists.
Unions said the inflation figures provided further evidence of a “clear pathway” for the RBA to cut rates in February.
“The RBA needs to stop sitting on their hands and start cutting interest rates from February because household budgets will take months to repair,” Michele O’Neil, the President of the Australian Council of Trade Unions, said.
Building costs and approvals
One of the items that recorded a decline in the inflation numbers was the cost of building a new home.
That fell from 4.2% in the 12 months to October 2024 to 2.8% in November.
"Annual new dwellings inflation is now the lowest since July 2021, mainly due to builders offering discounts and promotional offers to entice business," the ABS says.
The inflation figures also show rental prices increased 6.6% in the 12 months to November, maintaining similar annual growth to October “amid low vacancy rates and tight rental markets in most capital cities,” the official statistician noted.
Separate figures released by the ABS show dwelling approvals fell 3.6% in November to 14,998.
Freestanding house approvals fell 1.7%, to 9,028, while apartments fell 10.8%, to 5,285.
The value of total residential buildings in November 2024 also fell 0.5% to $8.36 billion.
Although building approvals are trending up overall, the monthly approvals figure is still low in historical terms.
It also needs to be up to around 20,000 approvals a month (or 240,000 a year) to have any chance of getting to the national goal of building 1.2 million new homes by mid-2029 and addressing the existing huge shortfall in housing.
Research by AMP last year estimated that, at a time of high immigration, Australia was already between 200,000 and 300,000 homes short for its existing population.
Oxford Economics Australia Head of Property and Building Forecasting, Timothy Hibbert, said he expected around 170,000 dwellings to have been built during 2024, up 4% in 2023.
"Signs are that we will see further modest improvement in 2025, with attached dwellings providing increased support," Mr Hibbert said.
However, he noted that “utility connection bottlenecks and trade labour shortages will inevitably apply a speed limit on the recovery.”
Mr Hibbert also said many approved projects would not proceed until financing costs for developers ease, a situation that’s unlikely to occur until interest rates fall substantially.
"We don't expect a more meaningful double-digit recovery in total approvals until 2026, when mortgage rate cuts aid the release of pent-up housing demand, while traction on the supply policy front will become increasingly evident."