Key takeaways
The monthly CPI for January 2025 rose by 2.5% year-over-year according to the ABS.
However, the underlying inflation rate ticked up slightly from 2.7% to 2.8%, which the RBA watches more closely.
Dr. Andrew Wilson warns that this inflation trend may not be sustainable, as it is influenced by factors like post-Covid supply adjustments and temporary electricity rebates.
One of the biggest inflation drivers remains international oil prices, which have been easing.
After slowing towards the end of last year, rents are increasing due to record-low vacancy rates and ongoing demand.
Dr. Wilson’s latest data from My Housing Market confirms that landlords are regaining pricing power in many parts of the country.
Now that the Reserve Bank has delivered its first rate cut for this cycle everyone is keen to know when the next cut is coming and carefully watching our inflation figures.
Well, last week the ABS reported that the monthly consumer price index for January rose 2.5% on a year-over-year basis.
Does that mean inflation is under control and will be getting further rate cuts?
That’s what I want to ask Australia’s leading housing economist, Dr. Andrew Wilson Chief Economist of My Housing Market.
The latest data from the Australian Bureau of Statistics indicates that the monthly Consumer Price Index (CPI) for January 2025 rose by 2.5% on a year-over-year basis.
This is the monthly CPI figure, and we know the RBA places more emphasis on the quarterly CPI figures and on the “underlying” inflation, which this month increased from 2.7% to 2.8% – still within its preferred range – but lifting slightly.
Watch this Property Insider chat as Dr Andrew Wilson explains why he doesn’t think that falling is not “sustainable.”
Dr. Wilson explains that the low inflation figure reflects post-Covid supply adjustments as well as the electricity rebates, and that one of the biggest factors affecting inflation is international oil prices.
The following chart shows how oil prices have been easing over time.
Key contributors to the CPI increase this month included food and non-alcoholic beverages, which saw a rise of 3.3%, and alcohol and tobacco, which increased by 6.4%.
Conversely, there was a significant decline in electricity prices, which fell by 11% compared to the previous year.
This steady inflation rate is critical as it suggests that inflation is neither accelerating uncontrollably nor slowing down significantly, which provides a stable economic environment.
However, as explained, while the headline CPI is within the desired range, underlying inflation measures, such as the trimmed mean CPI, rose slightly to 2.8%.
This suggests that core inflation, which excludes volatile items like food and energy, is slightly higher, reflecting more widespread inflationary pressures.
Given the current inflation data, the RBA may adopt a cautious approach regarding interest rate adjustments.
The slight uptick in the core inflation measures will keep the RBA vigilant against potential inflationary risks, possibly influencing future monetary policy decisions to ensure inflation expectations remain well-anchored.
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4 Comments
Rook
March 4, 2025This post provides a comprehensive analysis of inflation and how it impacts the property markets. It helps to debunk common misconceptions and offers valuable insights for investors. Readers will gain a better understanding of inflation’s potential consequences and learn how to navigate this complex economic phenomenon in the real estate sector.
Frosty Squid
March 4, 2025This post provides excellent insights into the intricate relationship between inflation and property markets. I always believed that inflation would lead to a rise in property prices, but now I understand that the impact can vary based on various factors such as location and demand. It’s fascinating how economic factors interact with real estate.
As a property investor, I’ve always been cautious about how inflation affects my investments. This post shed light on the different scenarios that can arise, depending on whether inflation is high or low. It’s crucial to have a well-diversified portfolio to mitigate the impact of inflation and capitalize on market opportunities.
I appreciate the thought-provoking explanation of inflation’s impact on property markets in this post. It’s interesting to ponder whether landlords adjust their rental prices accordingly when inflation is high, or if other factors take precedence. Does anyone have personal experience or data on this?
Wow, this post expanded my understanding of the effects of inflation on property markets. I hadn’t considered the correlation between interest rates and property prices before. It’s intriguing to think about how changes in interest rates can influence buyers’ affordability and subsequently affect property market dynamics.
I’ve always wondered about the long-term implications of inflation on property investment. This post offers valuable guidance on how to assess and potentially benefit from inflationary periods in the property market. It would be interesting to know if there are specific property sectors that tend to perform better or worse during inflationary periods.
The insights provided in this post really clarified how inflation impacts property markets. It’s essential for homeowners and potential buyers to consider inflation when making long-term decisions. Are there any strategies or specific adjustments that homeowners can make to protect themselves from the negative effects of inflation on their property investments?
Fascinating read! I never gave much thought to the concept of inflation’s impact on property markets. This post has motivated me to dig deeper and educate myself further on this topic. Thank you for providing a clear and concise explanation that’s easy for beginners like me to understand.
Lskeee
March 4, 2025This post provides a comprehensive understanding of inflation and its effects on property markets. It explains with clarity how inflation impacts property values and provides useful insights for potential investors. The post is well-researched and backed by data, making it a valuable resource for anyone interested in property investments.
Jersey
March 4, 2025This article provides valuable insights into the often misunderstood concept of inflation and how it affects the property markets. As inflation continues to rise, it’s crucial for investors and homeowners alike to understand its impact and make informed decisions. Whether you’re a seasoned investor or a first-time homebuyer, this post will equip you with the knowledge needed to navigate the ever-changing landscape of property markets in the face of inflation.