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Economics update | 30 June 2023
30 Jun 2023
The inflation rate slows to 5.6 per cent, defying expectations, but still well above the target range
The monthly consumer price index retreated to 5.6 per cent in the year to May 2023, slowing from a 6.8 per cent rise in the year to April 2023. This defied the market expectations of a fall to 6.1 per cent. This is the lowest annual inflation rate since April 2022.
The decrease in the rate of inflation was led by transport prices, down to 0.8 per cent from 7.1 per cent in April, due to a sharp drop in the costs for automotive fuel, down 8 per cent in the year to May 2023. This was due to an increased in global oil production and Australian dollar holding strong, lowering the cost for imported oil. Also, the pace of growth in housing prices slowed, down to 8.4 per cent from 8.9 per cent in April, led by an easing in the costs for new dwellings easing, down to 8.3 per cent. Travel and accommodation also exerted downward pressure on prices, down to 7.3 per cent from 11.9 per cent in April.
Meanwhile, the food and non-alcoholic beverages prices remained steady at 7.9 per cent, while housing rent continued to climb, up 0.2 percentage points to 6.3 per cent in May.
The RBA’s consecutive rate increases are now showing as inflation softens. Yet inflation still remains well above the RBA’s target range of 2-3 per cent.
With a marked easing in inflation, it’s anticipated that Reserve Bank will hold off any increases in the interest rate at its meeting next week.
Job vacancies easing, but remain exceptionally high
Recent data show job vacancies have fallen 2 per cent in the three months to May, to 432,000. This figure is exceptionally high relative to pre-COVID levels of around 220,000. Sectors with the greatest number of vacancies include healthcare and social assistance (72,900), professional, scientific, and technical services (44,7000), and accommodation and food services (42,500).
A quarter of all businesses (24.7 per cent) are reporting at least one vacancy. Sectors experiencing the greatest challenges finding workers include electricity, gas, water, and waste services (36.7 per cent), accommodation and food services (35.5 per cent), administrative and support services (34 per cent).
This ongoing high level of vacancies, combined with high labour participation rates and low unemployment, is reflected in the continuing labour shortages in most industries.
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