Data released by the Australian Bureau of Statistics (ABS) showed consumer price increases decelerated from 1.0% to 0.2% in Q3 2024 against market expectations of a 0.3% reading.
On an annual basis, Q3 CPI dropped from 3.8% to 2.8%, above the midpoint of the Reserve Bank of Australia’s (RBA) 2% – 3% inflation target.
ABS cited “significant falls” in electricity and fuel costs as the driver for slower inflation. The slowdown was driven by a 17.3% drop in electricity prices due to the government’s subsidies, while petrol fell 6.2% in the quarter.
The report further noted that Recreation and culture (+1.3%), Food and non-alcoholic beverages (+0.6%), and Alcohol and tobacco (+1.3%) saw the biggest increases, while government rebates for energy bills started in July 2024 and may have helped reduce electricity costs for households for the period.
Trimmed mean inflation, which excludes the declines in energy and fuel prices, also fell from 4.0% to 3.5% in the September quarter.
Services inflation, a main concern for the RBA, ticked higher from 4.5% in Q2 to 4.6% in Q3 and remained around 4.5% for the past 12 months.
Link to Australian Bureau of Statistics (ABS) Q3 2024 CPI report
In a separate release, ABS shared that inflation printed at 2.1% from a year ago in September, much slower than August’s 2.7% increase.
The annualized trimmed mean inflation was also at 3.2%, slower than August’s 3.4% increase.
Link to Australian Bureau of Statistics (ABS) September report
ABS detailed that Food and non-alcoholic beverages (+3.3%), Alcohol and tobacco (+6.3%), and Housing (+1.6%) saw the biggest price increases but were partially offset by a decline in Transport (-3.8%) prices.
Australian dollar vs. Major Currencies: 5-min
Overlay of AUD vs. Major Currencies Charts by TradingView
The Australian dollar started the day slightly weak after optimism over China’s potential $1.4 trillion fiscal stimulus plans cooled from the previous session.
The comdoll traded in ranges ahead of the report and shot higher when the annual Q3 CPI reading remained above the midpoint of RBA’s 2% – 3% target as the central bank projected. What’s more, the decline was mostly driven by lower fuel prices and temporary government energy subsidies. Last but not least, components such as services inflation remain elevated, supporting the need for tight monetary policies for a while yet.
AUD shot up across the board as traders speculated that the report probably won’t move the needle for the RBA. The upswing lasted for about an hour before overall risk aversion and cautiousness ahead of this week’s major events dragged AUD to new intraday lows.