Australia’s CPI Falls to 2.8% as Inflation Hits a Post-Pandemic Low: Outlook for Interest Rate Cuts. 📉🎢📈📊
The recent release from the Australian Bureau of Statistics (ABS) shows that inflation in Australia has eased significantly, with the national annual Consumer Price Index (CPI) falling to 2.8% after a modest 0.2% rise in the September quarter.
This is the lowest quarterly increase since June 2020, marking a hopeful sign for borrowers and businesses alike.
Meanwhile, Sydney recorded a CPI of 2.9% for the same period, reflecting a slightly higher inflation rate in comparison to the national average.
The cooling inflation is particularly significant as it brings Australia back into the Reserve Bank of Australia’s (RBA) target band of 2–3% for the first time since early 2020.
As recently as December 2022, inflation was at a high 7.8%, leading to increased rates to curb demand and stabilise the economy.
However, RBA Governor Michele Bullock has tempered expectations of interest rate cuts in 2024, reminding markets that the central bank’s preferred measure, the trimmed mean inflation, sits slightly above the target at 3.5%.
This indicates the bank is likely to tread cautiously to avoid sudden economic disruptions, particularly with the anticipated inflation uptick forecasted for late next year when government energy rebates expire.
Impact on the Industrial Property Sector
For M5 Industrial and the broader industrial property sector, these developments provide some optimism.
Controlled inflation rates generally enhance purchasing power, making it easier for businesses to manage operating costs and tenants to make rental commitments.
It also implies that while borrowing costs might not decrease immediately, the anticipated interest rate reductions, likely delayed to 2025 according to the CBA’s revised projections, suggest a gradual easing that could ultimately stimulate investments and growth in the sector over the next few years.
Although the RBA and major banks predict the first rate cut may not come until February or April 2025, the overall economic sentiment is one of cautious optimism.
The CBA and other major banks have slightly different forecasts regarding the total number of rate cuts, ranging from three to five by the end of 2025.
Such a trend would directly benefit the industrial sector by potentially reducing financing costs and opening up opportunities for expansion and acquisition at more favourable terms.
In summary, M5 Industrial believes that while interest rate relief may not be immediate, the national CPI’s return to the RBA’s target band and Sydney’s steady CPI at 2.9% is a promising step toward a more balanced economic environment.