Australia's inflation will fall; Westpac expects 2.3% by June 2025

“We have a lower inflation forecast than the RBA [Royal Bank of Australia] both for late 2024 and June 2025. We suspect this is due to the stronger impact of cost of living measures as well as falling fuel prices,” Justin Smirk, senior economist at Westpac, wrote in a company bulletin.

Westpac's reduced average forecasts are quite similar to those of the RBA.

Westpac Banking Corporation has forecast that Australia's consumer price inflation rate will decline to 2.6 percent per annum by December 2024 and 2.3 percent per annum in June 2025. The consumer price index rose 1 percent in the June quarter, exactly as Westpac expected. Wage growth has already moderated and labour costs do not pose a threat to inflation.

The consumer price index rose 1 percent in the June quarter, exactly what markets and Westpac had expected. The annual pace rose slightly from 3.6 percent per year to 3.8 percent. In December 2023 it was 4.1 percent per year.

Wage growth has already begun to tip over, and given the recovery in productivity, Westpac no longer sees any risk of inflation in labour costs.

The wage price index (WPI) rose 0.8 percent in the June quarter, in line with Westpac's forecast of 0.8 percent but below the market consensus of 0.9 percent.

On an annual basis, wages remained unchanged at 4.1 percent per annum due to seasonal fluctuations, but are still below the peak of 4.2 percent per annum in December.

Wage inflation moderated in the first half of this year, with the six-month annualised rate falling from 4.7 percent per year in December 2023 to 3.4 percent per year in June 2024.

Fibre2Fashion News Desk (DS)