Australia’s Inflation Hits 3-Year Low

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Australia’s inflation rate has experienced a significant slowdown, marking its lowest level in over three years. According to the latest data from the Australian Bureau of Statistics (ABS), the Consumer Price Index (CPI) rose by 2.4% in the 12 months leading to the end of December 2024, down from 2.8% in the previous quarter. This represents the lowest annual inflation rate since March 2021, when inflation stood at 1.1%, and is a sharp decline from the 7.8% peak observed in December 2022.

Treasurer Jim Chalmers highlighted the “substantial and sustained progress in the fight against inflation,” noting that the inflation rate now sits within the Reserve Bank of Australia’s (RBA) target range of 2-3%, a key indicator of economic stabilization. In parallel, the ABS reported that annual trimmed mean inflation—excluding volatile price fluctuations—reached 3.2% in the year to December, down from 3.6% in September, and the lowest since December 2021.

The RBA had previously forecasted underlying inflation to be 3.4%, while economists had expected a figure around 3.3%. Cherelle Murphy, Chief Economist at Ernst and Young (EY) Oceania, indicated that these figures could signal the possibility of an interest rate cut by the RBA at its next meeting, scheduled for mid-February 2025. The central bank has maintained its cash rate target at 4.35% since November 2023, with no rate cuts since November 2020.

This reduction in inflation reflects the ongoing success of Australia’s monetary policies and suggests a potential easing of interest rates, contributing to broader economic stability.


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