We have an apology to make, and we offer it sincerely to the Financial Review.
Yesterday on social media we engaged in some rather easy satire in the wake of the dramatically lower inflation results for the December quarter revealed by the Australian Bureau of Statistics, suggesting the AFR would note that inflation had fallen but demand the Reserve Bank continue to lift interest rates. It was a joke — we didn’t think that even the AFR could be that stupid and that its hatred of ordinary Australians could be that intense.
As it turns out, rather than parody, the tweet was almost perfectly accurate: today the AFR notes that while there has been an “encouraging” fall in inflation, the RBA needs to lift rates again. The only thing we got wrong was that instead of blaming Labor’s changes to the stage three tax cuts, the AFR blames higher wages growth for the need to keep punishing Australians.
Undoubtedly, the results caused deep rage at the in-house journal of Australia’s last remaining neoliberals and the much larger phalanx of business shills. Both the quarterly and the monthly CPI indicators for December have now come in lower than forecast — and much lower than expected by the Reserve Bank in its last set of forecasts in November’s final Statement of Monetary Policy for 2023. Gosh — who said the RBA doesn’t understand inflation?
Quarter-on-quarter inflation slowed to an increase of 0.6% in the three months to December, half the 1.2% in the September quarter and less than a third of the 1.9% jump in the December 2022 quarter. Core inflation as measured by the trimmed mean method fell for the fourth quarter in a row to 4.2% annually from 5.1% in the September quarter and the peak of 6.8% in the December 2022 quarter. That was much lower than most forecasts.
The outcome — and the evidence from the December (and revised November) retail sales data, showing consumers have been smashed — won’t see the RBA change tack at next week’s first 2023 meeting (the first two-day meeting ever), but it will give its ideologues something to think about with few signs of embedded inflation.
There remain some areas of concern: insurance costs were still up 3.8% in the quarter and a massive 16.2% for the year. That’s down to the big rise in road accidents that marked 2023 (especially in NSW, Victoria and South Australia) and the continuing impacts of climate change on the frequency and intensity of major weather events (it turns out, constantly electing politicians who think climate change is nonsense doesn’t actually stop climate change… who knew?)
Insurance premia aren’t going away as a source of inflation — they are one direct example of how our refusal to do anything about the climate emergency will make for a more volatile and inflationary world.
An increase in tobacco excise also drove a big increase in the tobacco and alcohol category, for the few remaining Australians unable to quit. The diminishing ranks of smokers really do deserve our thanks (delivered from a distance) — they don’t just pay for the full costs their addiction inflicts on the health system, they continue to provide a generous stream of additional revenue.
Otherwise, it was all smiles across most goods and services categories. The cost of meat and fruit fell in the quarter as farmers either took advantage of better growing conditions and the lack of wet weather that made life tough in 2022 and 2021 or were forced to sell off stock in what looked like a developing El Nino dry spell — which now may not continue. The extent to which the supermarket duopoly is passing on these reductions in full — after increasing their margins over the last couple of years — is now under investigation by the Australian Competition and Consumer Commission, and not before time.
And power prices should fall significantly mid-year when dramatically lower wholesale power prices are reflected in retail prices. If they’re not, the relevant regulators, and the governments who oversee them, should be chucked out on their ears. Ordinary Australians have already endured far more than they should from business, governments and the galahs in the business media.
