The Australian inflation rate is actually falling
Peter Esho, Wealthi Co-Founder caught up with Ausbiz TV yesterday to talk about the future for interest rates here in Australia (watch video above).
In today’s report, inflation came in better than expected, printing at 6.1% for the year compared to estimates of 6.3% and some fears that it could even hit 7%+. It's time to settle down. Key components were housing, fuel and imported goods like furniture but all of these have moderated in recent months. Shipping costs out of China have been falling, so getting that BBQ outdoor set or new lounge for Christmas might not be as expensive as first thought.
But here's the thing. Quarterly inflation rate was 1.8% compared to 2.1% in the previous quarter. The rate is actually falling. Sure prices are still going up, but at a lower rate and recent RBA movements will put even more downward pressure over the next few quarters.
Yesterday before the rate came out, in an internal team briefing, Peter wrote: “It's important to distinguish between inflation and the inflation rate. We don't think inflation has gone away, but we do think that the rate itself has peaked and over the next few quarters, central bank rate hikes will be successful in driving the rate back down into the low single digits.”
Bottom line: We continue to hold our view that the inflation rate has peaked and perhaps more importantly, central banks are being successful in bringing it back down to earth after years of flooding the system with cheap debt. We're looking forward to next year where we think the RBA will pause around 2-2.5% and wait to see the collateral damage caused by moving too late. For now it's better late than never.
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