Published 09:53 IST, March 27th 2024
Australia avoids inflation surge despite Taylor Swift concert frenzy
According to data, the CPI for February exhibited an annual increase of 3.4%, remaining unchanged from January and staying below forecasts of 3.5%.
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Australian consumer price index: Despite the fervour surrounding sold-out Taylor Swift concerts in Sydney and Melbourne, Australia managed to navigate through the event without a significant spike in inflation. Travel and hotel costs across other parts of the country dipped in February, keeping interest rates poised for potential cuts later in the year.
According to data released by the Australian Bureau of Statistics on Wednesday, the monthly consumer price index (CPI) for February exhibited an annual increase of 3.4 per cent, remaining unchanged from January and staying below forecasts of 3.5 per cent. The month-on-month CPI rise stood at 0.2 per cent, with the three-month annualised pace reaching 2.4 per cent, well within the central bank's target band of 2 per cent to 3 per cent.
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In response to the data, the Australian dollar eased by 0.2 per cent to $0.6519, while three-year bond futures bounced from earlier lows to register a gain of 2 ticks to 96.42. Market sentiment continued to speculate that any potential rate adjustments would likely commence in August or September.
Rob Carnell, Asia-Pacific head of research at ING, noted, "While it may appear that inflation has bottomed out, base effects over the coming months should make it easier for inflation to resume its descent," hinting at the possibility of monetary easing later in the year.
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However, despite overall stability, a key measure of core inflation, the trimmed mean, experienced a slight uptick, rising to an annual 3.9 per cent from 3.8 per cent in January. This contrasts with policymakers' forecasts, which anticipated a decline to 3.6 per cent by June.
Market indicators suggest a 68 per cent chance that the Reserve Bank of Australia will implement a quarter-point cut to its 4.35 per cent cash rate in August, with a move fully priced in for September. Futures markets imply a relatively modest 40 basis points of easing for the entirety of 2024.
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The Taylor Swift effect
The so-called “Taylor Swift effect” initially drove up travel and hotel-related costs in major cities like Sydney and Melbourne, however, it did not significantly impact headline inflation in February. ABS head of prices statistics, Michelle Marquardt, explained, "Although Taylor Swift performances saw hotel prices rise in Sydney and Melbourne, elsewhere accommodation and airfare prices fell in February due to the end of peak travel during the January school holiday period."
The report highlighted a 9.3 per cent decrease in holiday travel and accommodation prices in February compared to the previous month, countering increases in fuel, education, and clothing costs.
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Despite these fluctuations, certain sectors experienced accelerated inflation. Prices for services such as hairdressers, restaurant meals, and takeaway food rose annually by 7.0 per cent, 4.4 per cent, and 6.6 per cent, respectively. Rent inflation accelerated to 7.6 per cent in February from 7.4 per cent the previous month, while insurance prices rose 8.4 per cent year-on-year, up from 8.2 per cent in January.
Tapas Strickland, head of market economics at National Australia Bank, remarked, "For us, at least the data doesn't have too much in the way of implications in terms of our rate call, which is for the RBA to move in November," suggesting a cautious approach to rate adjustments amidst evolving economic indicators.
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With the labour market showing resilience, supported by the addition of 116,500 jobs in February and a decline in the jobless rate to 3.7 per cent, Australia's economic outlook remains nuanced, with future inflationary pressures closely monitored.
(With Reuters inputs.)
09:53 IST, March 27th 2024