Presented by Jones Partners
Inflation: 5.4 per cent
Core inflation continues to slowly decline. Reasonable progress has been made since the March peak of 7.8 per cent. Inflation will likely stay above target for longer than initially anticipated, requiring interest rates to also remain high. Inflation is on track to return to the target 2-3 per cent by 2025. Consumer Price Index inflation continues to present the greatest challenge. High oil prices, supply chain issues, high consumer demand and limited housing supply are the greatest contributors to this “sticky CPI inflation”.
Cash Rate Target: 4.35%
The RBA delivered a final hike for 2023 during its November meeting. The Board continues to pursue its inflation target of 2-3 per cent. The effect of the cash hikes continues to circulate throughout the economy. Further hikes in 2024 remain a possibility, whilst the RBA continues to pursue a soft landing for the Australian economy.
Economic Growth 2.1%
Economic growth has slowed since our last update, but still remains positive. A technical recession is defined by two consecutive quarters of negative economic growth. Australia’s economic growth remained positive for the duration of 2023. The “soft-landing” appears more likely than ever before, a sentiment that has been echoed by several bank executives during a meeting in Canberra in early September. Growth will likely be stimulated through increased economic activity during the Christmas period.
Wage Growth 4.0 per cent
Wage growth has increased again since the last update but continues to fall behind inflation. It is important that wage growth remains steady enough to protect spending and consumption patterns. Excessive wage growth can have a detrimental impact on inflation, in what is called a “wage-inflation spiral”.
Unemployment Rate: 3.7 per cent
The unemployment rate has increased slightly since our last update, but overall remains low. A tight labour market and job vacancies are the greatest contributors to this statistic. In June 2022, the unemployment rate hit 3.5 per cent, the lowest since 1974. Unemployment is predicted to rise slightly in 2024.