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Inflation Expectations unchanged at 4.5%

Source: Roy Morgan Single Source: Interviews with an average of 4,000 Australians per month aged 14+ (April 2010 – December 2017).
In December Australians expected inflation of 4.5% per year over the next two years. This is unchanged for a second straight month although up 0.3% from a year ago in December 2016.

Over the past year the increase in Inflation Expectations has been driven by significant increases in the two resource intensive States of Queensland and Western Australia as the mining industry has recovered strongly – results supported by the monthly Roy Morgan Business Confidence index (117.4 in December 2017) which shows Business Confidence in the mining industry soaring over the past year.

Despite the increases in 2017 Inflation Expectations remain well below the seven year average of 5.0% and are based on a face-to-face survey of 4,167 Australians aged 14+ interviewed in December.


Roy Morgan Inflation Expectations Index – Expected Annual Inflation in next 2 years

Australian Inflation Expectations - December 2017 - 4.5%Source: Roy Morgan Single Source: Interviews with an average of 4,000 Australians per month aged 14+ (April 2010 – December 2017).


Inflation Expectations of L-NP & ALP supporters increase slightly in December

Analysing Inflation expectations by Federal voting intention shows ALP supporters (4.6%) have inflation expectations just above the national average and clearly higher than L-NP supporters (4.0%) although both increased in December.

In contrast, the Inflation Expectations of Greens supporters fell in December to 4.2% and are now a full percentage point lower than supporters of Independents/ Others that again have the highest Inflation expectations at 5.2%.


Inflation Expectations increased the most in Queensland & WA over the past year

Analysis of Inflation Expectations by State shows the rise in Inflation expectations over the past year has been driven strongly by increases in Inflation Expectations in Australia’s two most mining industry dependent States – Queensland and Western Australia.

Inflation Expectations in Queensland were 5.0% in December 2017, following a narrow re-election victory for the ALP Government of Premier Annastacia Palaszczuk in late November, and up a significant 1.1% over the past year since December 2016 – clearly the largest increase of any State.

Similarly, although still trailing the rest of Australia, Inflation Expectations in Western Australia increased to 4.0% in December 2017, up 0.6% over the past year. Inflation Expectations in Western Australia have been below the national average for most of the last two years and the recovery in the mining industry in 2017, shown by recent Roy Morgan Business Confidence releases, finally appears to be returning the broader Western Australian economy towards national averages.


Inflation Expectations up slightly in Tasmania, Victoria & SA but down in NSW

Inflation Expectations over the last year also increased, albeit more modestly, in Tasmania – now at 4.7%, up 0.1%, Victoria now at 4.6%, up 0.2% and in South Australia now at 4.2%, up 0.2%.

In contrast to the rest of the nation, Inflation Expectations in Australia’s largest State of NSW were little changed over the past year at 4.3%, slightly below the Inflation Expectations of 4.4% a year ago.


Inflation Expectations by State (December 2016 v December 2017)

Australian Inflation Expectations - December 2016 v December 2017Source: Roy Morgan Single Source interviews with 4,100 Australians aged 14+ in December 2016 and 4,167 Australians aged 14+ in December 2017.


Michele Levine, CEO, Roy Morgan says the increase in Inflation Expectations in 2017 has been broad-based but renewed strength in the mining industry helped boost Expectations the most in Australia’s resource-intensive states of Queensland & WA:

“Roy Morgan Inflation Expectations were unchanged at 4.5% in December, but when compared to a year ago Inflation Expectations are up 0.3% continuing a trend evident throughout 2017 as Inflation Expectations averaged 4.4% for the year compared to 4.1% in 2016.

“Analysing Inflation Expectations by State shows the yearly rise in Inflation Expectations has been led by the resource heavy States of Queensland and WA. Inflation Expectations in Queensland have increased to 5.0% over the past year, up from 3.9% a year ago and are now the highest of any State and in WA Inflation Expectations have increased a significant 0.6% to 4.0% in December 2017.

“Inflation Expectations in WA still trail other States, but sharp increase in prices of the key commodities of iron ore (WA) and coal (Queensland) over the past year have supported stronger economic growth in both of these resource-rich States.

“Early in 2016 iron ore prices were struggling to remain above $40 USD a tonne whereas in the last few months iron ore prices have been consistently above $70 USD – an increase of almost 100% on prices early in 2016. There’s been an even larger price increase for thermal coal which averaged around $50 USD a tonne in 2016 and has more than doubled to over $100 USD a tonne to end 2017.

“The renewed economic strength around Australia has also been picked up by the Roy Morgan Business Confidence Index – at 117.4 in December 2017 – its highest end to a year since December 2013, and recent strength in the ANZ-Roy Morgan Consumer Confidence Index which has had its best start to a year since the height of the mining boom in 2011.

“The increase in Inflation Expectations isn’t confined to only two States with increases over the past year in Victoria – now at 4.6%, up 0.2%, South Australia – now at 4.2%, up 0.2% and Tasmania – now at 4.7%, up 0.1%. Only in Australia’s largest State of NSW have Inflation Expectations not increased now at 4.3%, slightly below the year ago figure of 4.4%.

“In the past few years housing prices in NSW, and in particular Sydney, have increased at faster rates than the rest of the nation however in recent months housing price indicators show that growth in Sydney house prices has slowed and this may help explain the moderating of Inflation Expectations in New South Wales in the latter half of 2017.”

This face-to-face Morgan Poll on Australian inflation expectations was conducted during the month of December 2017 with an Australia-wide cross-section of 4,167 Australians aged 14+.


For comments or more information about Roy Morgan Research’s Inflation Expectations data, please contact:

Roy Morgan - Enquiries
Office:            +61 (3) 9224 5309
askroymorgan.@roymorgan.com


Monthly Roy Morgan Inflation Expectations Index (2010 – 2017)

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Yearly

Average

2010

n/a

n/a

n/a

5.9

5.8

5.5

5.6

5.4

5.5

5.8

5.6

5.8

5.7

2011

6.6

6.4

6.4

6.2

6.1

6.2

6.1

5.8

5.7

5.8

5.5

5.5

6.0

2012

5.4

5.5

5.9

5.9

6.0

6.2

5.9

5.9

5.8

5.7

5.6

5.4

5.8

2013

5.2

5.1

5.3

4.9

5.2

4.9

5.3

5.0

4.8

4.9

4.8

5.0

5.0

2014

5.1

5.2

5.2

5.1

5.1

5.3

5.0

4.8

5.0

4.8

4.9

4.4

5.0

2015

4.4

4.3

4.5

4.5

4.2

4.4

4.4

4.5

4.6

4.2

4.4

4.5

4.5

2016

4.3

4.2

4.2

4.2

4.0

4.0

4.1

3.9

4.1

4.1

3.9

4.2

4.1

2017

4.5

4.4

4.4

4.4

4.3

4.2

4.3

4.5

4.4

4.5

4.5

4.5

4.4

Monthly
Average

5.1

5.0

5.1

5.1

5.1

5.1

5.1

5.0

5.0

5.0

4.9

4.9

5.0

Overall Roy Morgan Inflation Expectations Average: 5.0


The questions used to calculate the Monthly Roy Morgan Inflation Expectations Index.

1) Prices.

“During the next 2 years, do you think that prices in general will go up, or go down, or stay where they are now?”

2a) If stay where they are now.

“Do you mean that prices will go up at the same rate as now or that prices in general will not go up during the next 2 years?

2b) If go up or go down.

“By about what per cent per year do you expect prices to (go up/ go down) on average during the next 2 years?”

3) If respondent says more than 5%.

“Would that be (x%) per year, or is that the total for prices over the next 2 years?”

The Roy Morgan Inflation Expectations Index is a forward looking indicator unlike the Consumer Price Index (CPI) and is based on continuous (weekly) measurement, and monthly reporting. The Roy Morgan Inflation Expectations Index is current and relevant.