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Economics update | 31 March 2023
31 Mar 2023
Inflationary pressures easing in February
It appears that inflation peaked at the end of 2022, with the new monthly Consumer Price Index (CPI) data from the ABS showing CPI falling to 6.8 per cent in February 2023 after reaching 8.4 per cent in December 2022.
Inflationary pressures have eased since the beginning of the year in holiday and travel accommodation (down from 29.3 per cent for the year to December to 14.9 per cent for the year to February), fuel prices (down from 10.8 per cent to 5.6 per cent) and the cost of dwelling construction (down from 16 per cent to 13 per cent) as supply chain constraints are beginning to diminish. However, these were offset to some extent by further price increases in rents (up from 4.1 per cent to 4.8 per cent), electricity (up from 16.1 per cent to 17.2 per cent) and some categories of food.
While the fall in the CPI was greater than expected and in general is positive, inflation remains extremely high and there is still strong inflationary pressure in many sectors of the economy. For many businesses, this high inflation is weighing heavily on the cost of doing business.
When the Reserve Bank meets again next week, the better than expected inflation number may give it some reassurance that the earlier cash rate increases are beginning to have an impact. It is time for the Reserve Bank to pause and hold back on any further cash rate increase at its April meeting.
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