In May 2021 Australians expected inflation of 3.7% annually over the next two years, unchanged from April and in-line with the average so far in 2021. However, Inflation Expectations are now 0.4% higher than they were a year ago – the biggest year-over-year increase since November 2017.
Inflation Expectations are still 1% point below their long-term average of 4.7% but have increased by 0.5% points since reaching a record low of only 3.2% in June 2020.
A look at Inflation Expectations by home ownership status usually shows Australians who rent have higher expectations than either homeowners or mortgagors paying off their homes and this relationship is again evident in the latest figures.
The Inflation Expectations of Australians who are renting are at 4.2% in May 2021, but up by only 0.4% points since the low point of June 2020 (3.8%).
Though they are still lower, the Inflation Expectations of homeowners have increased over the same period by a significant 0.7% points to 3.7% to now be in-line with the national average.
Unsurprisingly given the record low interest rates on new mortgages over the last year it is once again mortgagors paying off their home loan who have the lowest Inflation Expectations at 3.4%, although this is up 0.6% points since June 2020 (2.8%).
Inflation Expectations by Home Ownership Status: June 2020 cf. May 2021
Source: Roy Morgan Single Source: June 2020, n=5,767; May 2021, n=6,027. Base: Australians aged 14+.
Inflation Expectations are now highest in South Australia and lowest in Western Australia
On a State-based level Inflation Expectations are now highest in South Australia at 4%, an increase of 0.2% points from April.
Inflation Expectations are now slightly higher than the national average in both NSW at 3.8% (down 0.2% points from April) and Queensland at 3.8% (up 0.3% points) while they are now in line with the national average in Tasmania at 3.7% (down 0.7% points).
Victorian Inflation Expectations are slightly below the national average at 3.6% in May, down 0.1% points from April while Western Australia has the lowest Inflation Expectations at 3.4%, down by 0.4% points.
The ANZ-Roy Morgan Consumer Confidence Rating has continued to recover and was at 112.8 for the month of May 2021, an increase of 16.5pts (+17.1%) since June 2020.
Consumer Confidence for May was the highest monthly figure for the rating since the month of September 2019 (112.8) more than 18 months ago.
Inflation Expectations Index long-term trend – Expected Annual Inflation in next 2 years
Source: Roy Morgan Single Source: Interviewing an average of 4,500 Australians aged 14+ per month (April 2010 – May 2021).
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 were unchanged at 3.7% in May and have now spent six months in a tight range of 3.6-3.8%: