Interest rate hike guaranteed despite brief relief
Inflation may have eased slightly over recent weeks, although Australians are being warned not to expect a rate cut just yet.
Underlying inflation is still on the rise and Today money expert, Joel Gibson, is calling it a “lesson in statistics”.
Inflation may have eased slightly over recent weeks, although Australians are being warned not to expect a rate cut just yet. AFR/Glenn Hunt
“If you take a simple average of something, it can really be thrown out by statistical outliers... the numbers at the top and the numbers at the bottom,” he said.
“And that’s what headline inflation is doing at the moment, it’s come back down to four per cent… partly because of that fuel tax cut of 32c a litre which was brought in during April.”
But Joel said underlying or trimmed mean inflation is stripping out statistical outliers and looks at the persistent core of the economy, which is still trending upwards to 3.6 per cent as of this month.
“So the underlying story is still not good, it’s not a massive surprise because it was expected it would continue to trend upward before going back down again, but it just goes to show we haven’t solved the core problem, which is that some of those persistent things like housing cost and rent are still going upward,” he said.
Three of the four big banks are still predicting there will be no more rate cuts this year, but Joel said economists are split down the middle on whether it may happen.
“So I don’t think we need to catastrophise based on yesterday’s numbers, if you are a borrower, but the August decision will be the key one because that will be when they get the quarterly numbers and the RBA Governor did say we will see what the impact of the three recent rate hikes this year will look like.
“That is still flowing through and they are watching it very closely and that is why they weren’t prepared to move at the last meeting,” Joel said.
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