Cost-of-living relief measures, particularly electricity rebates, continued to reduce inflation in August, following a similar trend from July.
The Monthly CPI Indicator for August is expected to show further price drops, with Westpac forecasting a 15% fall in electricity costs as rebates from New South Wales and Victoria kick in.
“The various cost-of-living relief measures, most notably the electricity rebate, had a significant impact in August,” said Westpac senior economist Justin Smirk (pictured above).
Electricity prices saw a sharp 6.4% drop in July, and this trend is expected to continue in August due to ongoing rebates. Without these rebates, ABS estimated that electricity would have risen by 0.9%.
Additionally, fuel prices fell around 2% in August, thanks to a weakening in crude oil prices driven by lower demand and strong supply from North America.
While energy prices eased, housing costs continue to rise.
Rents increased by 0.6% in August, continuing the trend from the first half of 2024, where rents climbed by an average of 0.7% per month.
Dwelling prices also saw a moderate rise, with a 0.4% gain expected for August. This steady pace is anticipated to continue into 2025.
August provided an update on several services that are only surveyed quarterly.
Westpac predicts price increases for several categories, including meals out (0.8%), hairdressing (0.8%), and motor vehicle maintenance (0.9%).
However, some sectors, like urban transport fares, are expected to decline by 5.8%, while audiovisual services may drop by 0.5%.
Looking ahead, Westpac’s preliminary forecast for the September quarter CPI is a modest 0.3% quarterly increase, with an annual rise of 2.9%.
Inflation expectations continue to moderate, although consumer expectations remain higher than pre-COVID levels.
“Inflation expectations have moderated, but it’s worth noting that they are still slightly higher than the pre-COVID average.” Smirk said.
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