Inflation Expectations at 3.4% in November

In November Australians expected inflation of 3.4% annually over the next two years, down 0.1% points from October but still up 0.2% points on the record low in August. Inflation Expectations are still a significant 0.6% points below the pre-pandemic month of March 2020.

Over the last few months Inflation Expectations have increased from their record low of 3.2% and when assessed by home ownership status the drive higher has come from Australian home owners who now expect inflation of 3.4% annually over the next two years – up 0.3% points since August.

In this comparison Australians who are paying off their home now have the lowest Inflation Expectations at 3.1%, up only 0.1% points since August, while Australians who are renting again have the highest Inflation Expectations at 3.6%, but this is unchanged since August.

Inflation Expectations by Home Ownership Status August 2020 cf. November 2020

Source: Roy Morgan Single Source: Aug. 2020, n=6,119 and Nov. 2020, n=6,082. Base: Australians aged 14+.

Victorian Inflation Expectations up in November as ‘Lockdown 2.0’ finally ends

The opening up of Australia continued during November with border restrictions between states coming down throughout the month and Victoria fully out of lockdown in late October. Perhaps unsurprisingly, the biggest increase in Inflation Expectations for November was in Victoria, up 0.2% points to 3.4%.

On a State-based level Inflation Expectations are now highest in WA at 3.6% (down 0.1% point), SA at 3.6% (up 0.2% points) and Queensland at 3.5% (unchanged) - all above the national average.

Inflation Expectations are below the national average in New South Wales at 3.2% (down 0.5% points) and Tasmania at 3.3% (down 1.1% points).

On a regional basis Inflation Expectations are higher in Country Areas and are now at 3.6% (down 0.2% points) compared to 3.3% in Capital Cities (unchanged).

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 aged 14+ per month (April 2010 – Nov. 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 November are at 3.4%, down slightly on October but up 0.2% points since the record low in August and are being driven higher by Australian home owners:

The data for the Inflation Expectations series is drawn from the Roy Morgan Single Source which has interviewed an average of 4,400 Australians aged 14+ per month over the last decade from April 2010 – November 2020 and includes interviews with 6,082 Australians aged 14+ in November 2020.

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.

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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