AUSTRALIA DATA: Housing-Related Inflation Continues To Moderate

January headline CPI inflation printed slightly lower than expected at 2.5% y/y, in line with December. However, the underlying trimmed mean rose 0.1pp to 2.8%, but still below the top of the RBA’s 2-3% band. The first month of the quarter has limited updates for services inflation. The seasonally adjusted data is consistent with the RBA remaining cautious with it stating that “upside risks remain”.

• The seasonally-adjusted CPI ex volatile items and holiday travel rose 0.3% m/m to be up 2.9% y/y in January. The 3-month annualised rate increased to 3.1% from 1.2%.
• Headline seasonally adjusted rose 0.6% m/m last month, the highest monthly rate since August 2023. It was boosted by higher fruit prices due to disappointing harvests but also due to the Queensland electricity rebate.
• The ABS notes that the decline in electricity prices was smaller in January at -11.5% y/y up from -17.9% y/y in January. Without government rebates, electricity prices would have been down 1.2% y/y after 0.9% in December.
• The easing in housing inflation has been a key reason for the moderation in inflation which allowed the RBA to cut rates last week. Rents rose 5.8% y/y down from 6.2% due to higher vacancy rates. New dwellings rose 2.0% y/y down from 2.3%, the lowest since June 2021. The ABS observes that builders are discounting to attract customers and that supply chain flows have improved.
• Food & non-alcoholic drink prices increased 3.3% y/y up from 2.7%, as fruit prices rose 12.3% y/y.
• Auto fuel prices fell in January to be down 1.9% y/y after -1.4% y/y.

Australia CPI y/y%