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Inflation Expectations unchanged at 4.2% in January

Source: Roy Morgan Single Source: Interviews an average of 4,000 Australians per month aged 14+ (April 2010 – January 2019).

In January Australians expected inflation of 4.2% per year over the next two years. This is unchanged on December and down 0.3% on a year ago in January 2018. Inflation Expectations have now tracked in a narrow range between 4.2-4.5% for over two years since November 2016.

Analysing Inflation Expectations by home ownership status shows a decline in Inflation Expectations for home owners, for mortgagors paying off their home and for Australians who rent. Mortgagors now have the lowest Inflation Expectations of these three categories and have experienced the biggest decline in Inflation Expectations over the past year. See below for a full analysis of these results in more detail.

Inflation Expectations remain significantly below the eight year average of 5.0%. January Inflation Expectations are based on a nationwide face-to-face survey of 4,111 Australians aged 14+.

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


Source: Roy Morgan Single Source: Interviews with an average of 4,000 Australians per month aged 14+ (April 2010 – January 2019).

Inflation Expectations now highest in Tasmania and again lowest in Western Australia

Analysis of Inflation Expectations by State shows a mixed picture with Inflation Expectations rising in three States, down in two others and unchanged at 3.9% in Western Australia which once again has the lowest Inflation Expectations of any State.

Inflation Expectations increased slightly in New South Wales to 4.1% which is still below the national average of 4.2%, and also increased in South Australia to 4.3% and Tasmania to a high 5.2% - clearly the highest Inflation Expectations in the nation.

In contrast to other States, Inflation Expectations were down in Victoria to 4% and were also down in Queensland to 4.5%, still well above the national average.

Inflation Expectations unchanged for L-NP supporters but at record low for ALP supporters

Inflation Expectations for Australian electors were unchanged at 4% in January maintaining a level 0.2% below the national average for all Australians of 4.2%.

Once again it was L-NP supporters who had the lowest Inflation Expectations of any supporters unchanged at only 3.6%. L-NP supporters have now had the lowest Inflation Expectations of any supporters for nearly a year since April 2018.

Inflation Expectations for ALP supporters fell 0.1% to a record low of 3.9%. In contrast Inflation Expectations for Greens supporters increased by 0.3% to 4.3% while supporters of Independents/Others once again had the highest Inflation Expectations of any group at 4.5%, although this was down 0.3%.

Inflation Expectations down most for mortgagors, but also down for owners and renters

Analysing Inflation Expectations by home ownership status compared to this time a year ago shows Inflation Expectations down most for mortgagors by 0.5% to 3.7%. Mortgagors now have clearly lower Inflation Expectations than either Home owners or Australians who are renting.

Mortgagors, who are those Australians now paying off their homes, include those Australians who have purchased their home in recent years and comprise an increasing number of Australians who find themselves in negative equity as we covered here. Negative equity is created when the decline in the value of a house means the mortgage payable on the house is larger than the current value of the house.

Inflation Expectations are also down for both home owners and for renters. Inflation Expectations are down 0.3% to 3.8% for home owners and down by 0.3% to 4.9% for Australians who rent.

Inflation Expectations by Home Ownership status January 2018 cf. January 2019

Source: Roy Morgan Single Source: January 2018, n=4,053 and January 2019, n=4,111. Base: Australians 14+.

Michele Levine, CEO, Roy Morgan, says overall Inflation Expectations are unchanged at 4.2% in January but down 0.3% from a year ago driven lower by Australians paying off their house:

“Roy Morgan Inflation Expectations remain unchanged at 4.2% in January but down a significant 0.3% from a year ago. A longer-term analysis of Inflation Expectations shows the indicator has now been stuck in a narrow band between 4.2-4.5% for more than two straight years since late 2016.

“For much of this period the RBA has maintained a leaning towards increasing Australian interest rates at some point. However, at last week’s RBA monetary policy meeting, the Board of the RBA softened their stance and moved to a ‘neutral’ position indicating there was an equal chance of increasing or decreasing interest rates in future.

“The decline in housing prices in Australia’s two largest cities of Sydney and Melbourne, as well as moderating house prices elsewhere, has certainly given rise to increased calls for the RBA to cut interest rates in the near future.

“The latest Roy Morgan Inflation Expectations for January show that it is mortgagors, those Australians now paying off their home, who have seen the biggest decline in Inflation Expectations over the last 12 months, down by 0.5% to 3.7%.

As Roy Morgan showed in a recent press release an increasing proportion of Australian mortgagors now find themselves in negative equity which is when the value of the loan used to purchase a house is worth more than the current value of the house.

“Our figures show that negative equity is most prevalent in Western Australia and it is no surprise to know that Western Australia has the lowest Inflation Expectations of any State at only 3.9%. The last time the RBA cut interest rates was when the national rate of Inflation Expectations dipped below 4% for the first time in August 2016.

“A further decline in Inflation Expectations will build pressure on the RBA to follow through with interest rate cuts to stimulate the Australian economy which faces significant uncertainty over the next few months with a NSW State Election and a Federal Election due before mid-year.

“Contact Roy Morgan today to learn more about how your consumers and customers are tracking.”


This in-depth face-to-face research on Australian inflation expectations was conducted during the month of January 2019 with an Australia-wide cross-section of 4,111 Australians aged 14+.


Monthly Roy Morgan Inflation Expectations Index (2010 – 2019)

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

4.5

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

2018

4.5

4.4

4.3

4.5

4.3

4.5

4.3

4.3

4.3 4.5 4.3 4.2

4.4

 2019  4.2                       4.2

Monthly
Average

4.9

4.9

5.0

5.1

5.0

5.0

5.0

4.9

4.9

4.9

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 upgo downon 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.

For comments or more information please contact:
Roy Morgan - Enquiries
Office: +61 (03) 9224 5309
askroymorgan@roymorgan.com


About Roy Morgan

Roy Morgan is the largest independent Australian research company, with offices throughout Australia, as well as in Indonesia, the United States and the United Kingdom. A full service research organisation specialising in omnibus and syndicated data, Roy Morgan has over 70 years’ experience in collecting objective, independent information on consumers.

Margin of Error

The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.

Sample Size

Percentage Estimate

40%-60%

25% or 75%

10% or 90%

5% or 95%

5,000

±1.4

±1.2

±0.8

±0.6

7,500

±1.1

±1.0

±0.7

±0.5

10,000

±1.0

±0.9

±0.6

±0.4

20,000

±0.7

±0.6

±0.4

±0.3

50,000

±0.4

±0.4

±0.3

±0.2