Inflation trends: The flow on effects. And why you can't hold a central bank to account. What you need to know
Australian CPI fell from 5.4% YoY to 4.9% YoY in July, with inflation recording a bigger drop than expected.
This means the RBA will likely keep interest rates as they are, at 4.1% at next week's meeting.
It's a bit of a reprieve for mortgage holders, who got burnt when they actually listened to the RBA governor who said 'rates won't rise till 2024'.
Since May 2022, the RBA hiked rates 12 times, by 4% in total, taking the cash rate from 0.1% to 4.1%.
The average mortgage holder in Australia, with a $586,054 loan, felt their owner-occupier variable loan rate rise from 2.86% (source: RBA, April 2022 ), to about 6.6%. Meaning, the average. A stralia is paying $1,319 p/m extra in repayments. That's $15,828 p/year.
The futures are expecting the RBA to cut interest rates in August next year (2024- the year the RBA said it would start raising interest rates). So, expect interest rates to likely stay as they are, at 4.1%, till August 2024.
Despite the CPI falling, there are some trends to note...
Fruit and Vegetable prices are down 5.4% YoY
Electricity prices are on the move, up 15.7% YoY
Gas prices are up 13.9% YoY
Insurance and financial services costs are up, 8.5% YoY
8. Investor considerations?
Shares in Australia's largest Electricity and gas sellers are up YTD: Original Energy $Origin Energy Ltd Origin Energy Ltd(ORG.AU) $ is up 15%, AGL $AGL Energy Ltd$$AGL Energy Ltd(AGL.AU)$$$is up 42%.
Insurers groups are trading up:
Insurance Australia $Insurance Australia Group Ltd Insurance Australia Group Ltd(IAG.AU)$ is up 23% YTD. Medibank Private $Medibank Private Ltd Medibank Private Ltd(MPL.AU) $ up 21% YTD. QBE Insurance $QBE Insurance Group LtdQBE Insurance Group Ltd(QBE.AU)$ is 12% YTD.
9. Consensus suggests their shares will rise 8.24% on average over the next 12 months