The Squiz

It’s rare to be surprised on the upside, so yesterday’s update from the Bureau of Stats was a welcomed change from the recent reem of challenging economic news… Australia’s annual inflation rate fell to 4.9% in October – down from 5.6% in September. Economists had been predicting 5.2% – so many reckon this fall to a figure with a 4 in front of it has taken the pressure off the Reserve Bank to hike interest rates next week. As financial analyst Tony Sycamore put it: “The breath of relief from the (Reserve Bank’s) Martin Place HQ and mortgage holders nationwide was almost audible in the streets of Sydney.”

What’s behind the fall in inflation?

Economics wonks say it’s down to a few things. The price of clothing and footwear has now fallen 1.5% throughout the year, while fuel fell 2.9% in October. And finally, rental prices have come down, with those costs falling by 0.4% last month. The cost of taking some hols also fell by 7% in October – but food prices are proving a bit stickier, up 0.1%. But we’re not there yet… While good progress has been made since inflation peaked in December last year at 8.4%, it still has a way to go before it returns to the Reserve Bank’s sweet spot of 2-3%.

So overall, that’s pretty good? 

Don’t take it from us… Yesterday, Reserve Bank Governor Michele Bullock told a big banking conference in Hong Kong that Aussie households and businesses “are actually in a pretty good position. Their balance sheets are pretty good”. Her point was that she reckons people have coped well with the 13 rises that’ve taken the official cash rate to 4.35% – despite a lot of “noise” around every decision. Consumer spending over the past weekend seems to back up what she’s saying. Online retailer Temple and Webster had a 100% increase in Black Friday sales, saying “November is the new December”. The total Aussie retail spend from the past weekend isn’t in yet – but US online spending hit new records over the 4-day sales – up 7.8% year-on-year, totalling $38 billion of Americans bagging themselves a bargain…