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Inflation Expectations continue increase from record low in August and are now up to 3.5% in October

Source: Roy Morgan Single Source: August 2020, n=6,119 and Oct. 2020, n=6,136. Base: Australians aged 14+.

In October Australians expected inflation of 3.5% annually over the next two years, up 0.2% points from September and now up 0.3% points on the record low in August. However, Inflation Expectations are still a significant 0.5% points below the pre-pandemic month of March 2020.

The opening up of Australia continued during October with Victoria finally exiting a 16-week lockdown late in the month and border restrictions between various States being relaxed. Inflation Expectations increased in all States since August except Victoria which has the lowest in the nation at only 3.2% (unchanged).

On a State-based level Inflation Expectations are now highest in Tasmania at 4.4% in October, up 1% point since August ahead of NSW on 3.7% (up 0.4% points) and WA on 3.7% (up 1% point).

Inflation Expectations are in line with the national average in Queensland at 3.5% (up 0.1% points) and just below that in SA at 3.4% (up 0.2% points).

On a regional basis Inflation Expectations are higher, and have increased further since August, in Country Areas and are now at 3.8% (up 0.3% points) compared to 3.3% in Capital Cities (up 0.2% points).

Inflation Expectations by State August 2020 cf. October 2020

Source: Roy Morgan Single Source: August 2020, n=6,119 and Oct. 2020, n=6,136. Base: Australians aged 14+.

Inflation Expectations Index long-term trend – Expected Annual Inflation in next 2 years

Source: Roy Morgan Single Source: Interviews an average of 4,400 Australians per month aged 14+ (April 2010 – Oct. 2020).

See below for a comprehensive list of RBA interest rate changes during the time-period charted above.

Roy Morgan CEO Michele Levine says Inflation Expectations in October continued their rebound from the record low in August as border restrictions between States were relaxed and Victoria emerged from a near 4-month lockdown late in the month:

“Inflation Expectations increased 0.2% points to 3.5% in October and are now up 0.3% points since bottoming at a record low of 3.2% in August. The two-month increase is the largest for the Inflation Expectations index for over three years since mid-2017.

“Australia’s success in containing COVID-19 has clearly had a positive impact on consumer sentiment with the ANZ-Roy Morgan Consumer Confidence Index increasing for ten straight weeks since late August and now in positive territory for the first time since early March.

“In October Inflation Expectations continued higher in all States (except Victoria) led by Tasmania, up 1% point to 4.4%, WA up 1% point to 3.7% and NSW up 0.4% points to 3.7%. Inflation Expectations were lowest in Victoria at only 3.2% although the State remained largely in lockdown during October.

“The news in the last week that COVID-19 vaccines in development have success rates of over 90% suggests the positive momentum should continue in the months ahead as the vaccines move to the final stages of testing and approvals for wider roll-outs in 2021.

“Looking forward Australia is set to enjoy a ‘COVID-Normal Christmas’ and the signs are promising that 2021 will see a sustained return to growth which is vital for the 1 million Australians who have become unemployed or under-employed since lockdowns were enforced in Australia in mid-March.”


Roy Morgan October Inflation Expectations are based on personal interviews with a nationally representative sample of 6,136 Australians aged 14+.


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) “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.

Monthly Roy Morgan Inflation Expectations Index (2010 – 2020)

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

4.0

4.0

3.7

4.1

3.8

4.1

3.9

4.0

4.1

3.9

4.0

4.0

2020

3.9

4.0

4.0

3.6

3.3

3.2

3.4

3.2

3.3

3.5

3.5

Monthly
Average

4.8

4.8

4.8

4.8

4.8

4.7

4.8

4.7

4.7

4.7

4.7

4.8

4.8

Overall Roy Morgan Inflation Expectations Average: 4.8

RBA interest rates changes during the time period measured: 2010-2020.

RBA – Interest rate increasing cycle (2010):

2010
April 2010: +0.25% to 4.25%; May 2010: +0.25% to 4.75%, November 2010: +0.25% to 5%.

RBA – Interest rate cutting cycle (2011-2013, 2015-2016 & 2019-2020):

2011
November 2011: -0.25% to 4.5%; December 2011: -0.25% to 4.25%.

2012
May 2012: -0.5% to 3.75%; June 2012: -0.25% to 3.5%; October 2012: -0.25% to 3.25%;
December 2012: -0.25% to 3%.

2013
May 2013: -0.25% to 2.75%; August 2013: -0.25% to 2.5%.

2014
There were no RBA interest rate changes during 2014.

2015
February 2015: -0.25% to 2.25%; May 2015: -0.25% to 2%.

2016
May 2016: -0.25% to 1.75%; August 2016: -0.25% to 1.5%.

2017
There were no RBA interest rate changes during 2017.

2018
There were no RBA interest rate changes during 2018.

2019
June 2019: -0.25% to 1.25%; July 2019: -0.25% to 1%; October 2019: -0.25% to 0.75%.

2020
March 4, 2020: -0.25% to 0.5%, March 20, 2020: -0.25% to 0.25% & November 6, 2020: -0.15% to 0.10%.

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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%

1,000

±3.0

±2.7

±1.9

±1.3

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