Key Points
- Annual inflation came in at 4.9 per cent in the year to October.
- The Consumer Price Index was pushed up by housing, transport and food and non-alcoholic beverages.
- Economists explain why lower inflation might not mean lower food prices.
Economists say cooling inflation is good news for consumers, but have warned prices on some supermarket items are unlikely to fall.
The Australian Bureau of Statistics (ABS) on Wednesday released its monthly Consumer Price Index (CPI) indicator, , down from the 5.6 increase in September.
The most significant increases were in housing, which rose 6.1 per cent, food and non-alcoholic beverages, which went up 5.3 per cent, and transport, which increased 5.9 per cent.
It excluded volatile items such as fruit and vegetables, automotive fuel, holiday travel, and accommodation.
Dr John Hawkins, senior economics lecturer at Canberra University, said after peaking at the end of 2022,
"The smaller number means inflation is lower, but that doesn't mean prices are falling. It means they're increasing by less," he told SBS News.
He credited (RBA) for slowing down the economy and the gradual resolution of supply bottlenecks associated with COVID-19.
So how will this affect you at the checkout?
Will food prices drop?
The latest ABS data shows essential items including bread and cereals - up 8.5 per cent since October 2022 - and dairy, up 7.8 per cent over the same period, continue to hit people's pockets hardest.
Hawkins explained that the price of "volatile" items like fresh fruit and vegetables - which increased by 1 per cent in the 12 months to October 2023 - may decrease while other items will likely remain at current high prices.
"I doubt we'll see much fall in the price of general grocery items … the prices probably won't go up as much as they have in the last year or so, but the price probably won't actually fall," he said.
"When we talk about inflation, we're referring to the growth rate of prices. So even if inflation were to return to the target band then your prices will continue to rise," he said.
"So my expectation for the price of, for example sushi, is that it will remain where it is or continue to go up, but just at a more moderate pace."
Kulish said that the goal is for the purchasing power of your income to be higher than the steep increases of other costs like food or power bills.
"What we need for cost of living relief is for inflation to come down faster as ," he said.
How does Australia compare to other parts of the world?
EY chief economist Cherelle Murphy said a sub-five result in CPI growth was welcome news for the RBA and proof that cash rate increases are working.
"What is less clear is whether inflation is falling fast enough," she said.
A recent analysis by the Australian Financial Review of data from several sources, including the International Monetary Fund, found that Australia leads the 15 largest advanced economies in terms of headline inflation growth, at 5.4 per cent.
Next in the top five was the United Kingdom at 4.6 per cent, Singapore at 4.1 per cent, France at 4.0 per cent and Germany at 3.8 per cent.
The RBA has raised the in a bid to tackle inflation.
Kulish, who also sits on the RBA shadow board, thinks Australia is “lagging” behind Europe and the United States, with the US federal reserve cash rate at 5.50 per cent.
"I think they've also communicated their intention to keep interest rates higher for a longer period of time. Now that has resulted in inflation falling faster in the US than it has here because it has restrained demand more," he said.
"So I think Australia is lagging a little bit on that fight to bring inflation down, but it is coming down, which is good news."
With additional reporting by the Australian Associated Press.
