Inflation eases slight to 3.7 per cent in February but pain ahead when data for March takes in oil crisis
Australia’s inflation pace was still high at 3.7 per cent in February, suggesting there’s more pain to come from the global oil crisis.
Australia’s inflation level was still high before the US strikes on Iran triggered a global oil crisis, suggesting there’s more bad news to come for consumers.
The consumer price index for the year to February 28 eased slightly to 3.7 per cent, down from an annual pace of 3.8 per cent in January, new Australian Bureau of Statistics data released on Wednesday showed.
“Inflation came down a bit in February but it’s still too high and the war will make it worse,” Treasurer Jim Chalmers told reporters in Canberra on Wednesday.
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By continuing you agree to our Terms and Privacy Policy.“The inflationary pressures from the war in the Middle East are very substantial and we expect to see the consequences of that war push up inflation higher for longer in our economy.”
Being well above the Reserve Bank of Australia’s 2-3 per cent inflation target, this means a May rate hike is still considered likely even as high oil prices threaten to weaken an already lacklustre economy.
The underlying measure of inflation with volatile price items, known as the trimmed mean, was still elevated at 3.3 per cent.
The data covered the February 28 air strikes on Iran before they caused crude oil prices to shoot above $US100 a barrel for the first time in four years and see motorists pay more than $2.50 for unleaded petrol in Australia’s big cities.
Automotive fuel prices had fallen by an annual pace 7.2 per cent in February before the Middle East conflict.
Services costs were the biggest drain on finances last month with housing expenses rising by 7.3 per cent ahead of education on 4.8 per cent.
Volatile domestic holiday travel and accommodation cost had risen by 8.8 per cent.
Overall services inflation came in at 3.9 per cent while goods inflation rose by 3.5 per cent over the year but this is set to worsen as higher oil prices are passed on to consumers.
The futures market and most economists are still expecting a May 5 RBA rate hike, following the release of March inflation data.
“Another hike is possible if there is a larger pass-through of higher oil prices into other parts of spending and if inflation expectations remain elevated,” AMP deputy chief economist Diana Mousina said.
With economic growth already weak and expected to slow even more, Deloitte Access Economics chief Pradeep Philip said a May rate rise during an oil crisis risked making a bad situation worse.
“Time will tell whether last week’s rate hike was a prudent safeguard against domestic pressures and external shocks, or a premature move that risks weakening an already fragile economy being rocked by forces beyond its control,” he said.
