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AUSTRALIA: Sticky Services Inflation Not Just An Australian Problem

AUSTRALIA
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Australian September core and services inflation was lower than the US and the UK for services, yet both those central banks have begun to ease. The RBA pointed out that Australian rates were not as high as much of the OECD, including the US and UK, and that its economy is more sensitive to rates. With core still above target and services inflation rising in September, the RBA remains on hold. But sticky services may mean that easing by the Fed and BoE will also be cautious. 

  • The RBA is watching sticky services inflation not only in Australia but also elsewhere. This trend has continued with much of the OECD still above 4% and this persistence is likely to continue worrying the RBA.
  • It decided to hike rates less than other countries to ensure most of the employment gains were retained. The economy has created more jobs in the year to September in 2024 than in 2023. This and upside inflation risks means the RBA may be one of the last to begin easing.
  • Australian rates peaked at only 4.35% compared with the US at 5.5%, UK 5.25%, euro area 4.5% and Canada 5.0%.

OECD policy rates %

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Australian September core and services inflation was lower than the US and the UK for services, yet both those central banks have begun to ease. The RBA pointed out that Australian rates were not as high as much of the OECD, including the US and UK, and that its economy is more sensitive to rates. With core still above target and services inflation rising in September, the RBA remains on hold. But sticky services may mean that easing by the Fed and BoE will also be cautious. 

  • The RBA is watching sticky services inflation not only in Australia but also elsewhere. This trend has continued with much of the OECD still above 4% and this persistence is likely to continue worrying the RBA.
  • It decided to hike rates less than other countries to ensure most of the employment gains were retained. The economy has created more jobs in the year to September in 2024 than in 2023. This and upside inflation risks means the RBA may be one of the last to begin easing.
  • Australian rates peaked at only 4.35% compared with the US at 5.5%, UK 5.25%, euro area 4.5% and Canada 5.0%.

OECD policy rates %

Keep reading...Show less