“Annually, the December quarter’s rise of 2.4 per cent was down from 2.8 per cent in the September quarter.”

The Consumer Price Index rose 0.2 per cent in the December 2024 quarter and 2.4 per cent annually, according to the Australian Bureau of Statistics. Source: SBS News

The largest price rises were alcohol and tobacco, along with recreation and culture, while housing and transport offset the increase.

However, the CPI is only based on data from Australia’s capital cities and does not account for price changes in regional or remote areas.

“The trimmed mean excluded price falls in both Electricity and Automotive fuel this quarter, alongside other large price rises and falls. As a result, trimmed mean annual inflation of 3.2 per cent was higher than CPI inflation of 2.4 per cent,” Marquardt said.

Could we see a rate cut?

“My expectation is the RBA will follow up with two further rate cuts this year, not immediately but likely following confirmation of further declines in inflation following the next few quarterly CPI reports.”

He also flagged the fall in underlying inflation as an important factor.

“The RBA would probably yet again err on the side of caution and insist on ensuring a ‘sustainable’ decline in trimmed mean inflation, preferring to wait for that one additional data point for confirmation. However, the broader disinflationary trend is unmistakable.”

What are the ‘big four’ saying about rate cuts?

ANZ is the most cautious, expecting two cuts, while CBA and Westpac forecast four. NAB is predicting the most, with five cuts.

Electricity and fuel prices fall in quarterly CPI

The ABS attributes the dip in quarterly CPI largely to electricity and fuel prices falling.

“Automotive fuel prices fell 7.9 per cent over the 12 months to the December quarter, reflecting lower global oil prices over the year.”

Drop in fruit and vegetable prices

Price hikes slowed across most food categories, except for meat and seafood, where lamb prices surged by 17.3 per cent over the year.

“Supply continues to improve with prices falling in recent months for tomatoes, cucumbers, beans, mangoes and strawberries due to favourable growing conditions,” the ABS said.

Alcohol, tobacco and travel prices increase

“Domestic holiday travel and accommodation (5.7 per cent) was the main contributor to the rise due to an increase in travel demand during the school holiday period driving up prices for airfares and accommodation,” it said.

‘Encouraging signs’, Treasurer says

“We still have people under pretty extreme pressure but the sorts of things that we are preparing for and planning for are now unfolding. This substantial and now sustained moderation is a pretty remarkable achievement for which all Australians can share in.”

How does the RBA set the cash rate?

After increasing rates to 4.35 per cent in 2023, the RBA has kept the rate steady and will next convene in February, the earliest date Australia could see a reduction in the cash rate target.

— With additional reporting by AAP.