Lim’s team at the Melbourne Institute calculates a monthly CPI that has a longer history and is more developed than the Australian Bureau of Statistics’ monthly indicator. (See MNI INTERVIEW: Aussie Monthly CPI To Remain Despite Gaps - ABS) The metric slowed to 2.5% y/y over August from 2.8% the prior month. (See charts)
Interest rates are however unlikely to be cut dramatically, as the current 4.35% cash rate was likely very close to neutral, Lim said.
RBA overnight index swaps have priced in a 4.15% cash rate by the end of this year and continued easing throughout 2025.
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Overseas developments that could sharply impact import prices remain the most significant risk to the RBA’s potential 2025 easing, Lim said.
National accounts data which showed labour productivity fell by 0.8% over the June quarter, is also concerning, she added. "People are starting to look not just at productivity, but also at investment,” she continued. “It's a broader story. It's a story about innovation, about industry structure, about investment. There needs to be more focus on technology and skills development, recognising our economy is becoming more services-oriented."