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Inflation Expectations up for Public servants, down for everyone else

Source: Roy Morgan Single Source: Interviews with an average of 4,000 Australians per month aged 14+ (April 2010 – February 2018).
In February Australians expect inflation of 4.4% per year over the next two years. This is down 0.1% from a month ago but unchanged on a year ago in February 2018.

Despite overall Inflation Expectations remaining unchanged over the last year, there have been variations between Professionals/Managers, Skilled workers and the Self-Employed who have lower Inflation Expectations than a year ago and Semi-Skilled/Unskilled workers and those in the Public Service who have significantly higher Inflation Expectations than a year ago.

Inflation Expectations have levelled off in recent months after rising throughout 2017. Inflation Expectations have now been stable at either 4.4% or 4.5% for seven straight months.

Despite the increases throughout 2017 Inflation Expectations remain well below the seven year average of 5.0% and are based on a nationwide face-to-face survey of 3,984 Australians aged 14+ interviewed in February.

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

Roy Morgan Inflation Expectations Index - February 2018

Source: Roy Morgan Single Source: Interviews with an average of 4,000 Australians per month aged 14+ (April 2010 – February 2018).


Inflation Expectations driven lower by Liberal supporters in February

Analysing Inflation Expectations by Federal voting intention shows it is lower Inflation Expectations of L-NP supporters that have driven the national average lower, down 0.3% to 3.8% and now significantly below ALP supporters on 4.4%, down 0.1%.

In contrast, the Inflation Expectations of Greens supporters are up significantly to 4.4% although it is again supporters of Independents/Others that again have the highest Inflation Expectations unchanged at 5.3%.


Inflation Expectations by State highest in Victoria and again lowest in WA

Analysis of Inflation Expectations by State shows Victorian Inflation Expectations are now the highest in Australia at 4.7% just above Tasmania on 4.6%.

Inflation Expectations in New South Wales and Queensland are just above the national average at 4.5% and South Australia just below the national average on 4.3% while once again Western Australia has the lowest Inflation Expectations of any State, well below the national average at 3.7%.


Inflation Expectations highest for Semi/Unskilled workers and lowest for Self-employed

On a national level Inflation Expectations in Australia have been in a tight range of 4.4-4.5% for the last seven months and are unchanged compared to a year ago in February 2017. However, different employment categories and occupations have divergent views on the level of inflation in the Australian economy.

Semi-skilled and Unskilled workers (including farm owners and workers) now have clearly the highest Inflation Expectations by occupation of 4.9% in February, up 0.5% from a year ago and the only occupation category to increase over the past year.

Inflation Expectations fell slightly for White Collar workers to 4.3%, down 0.1%, and for Skilled workers and Professionals/Managers, both down 0.3% to 3.8% - now with Inflation Expectations more than a full percentage point lower than Semi-skilled and Unskilled workers.

Analysing Inflation Expectations by Employment category reveals those in Private Industry have the highest Inflation Expectations of 4.4%, although down 0.1% from a year ago which is slightly higher than the Inflation Expectations of Public service workers on 4.2%, up 0.4%.

The Self-Employed have clearly the lowest Inflation Expectations of only 3.3%, down 0.6% from a year ago.


Inflation Expectations by Occupation & Employment (February 2017 v February 2018)

Inflation Expectations by Occupation and Employment Category - February 2017 v February 2018

Source: Roy Morgan Single Source interviews with 4,129 Australians aged 14+ in February 2017 and 3,984 Australians aged 14+ in February 2018.


Michele Levine, CEO, Roy Morgan, says Inflation Expectations have now been within a tight band of 4.4-4.5% for seven months clearly the longest period of stability in the eight year history of the index:

“Roy Morgan Inflation Expectations are down 0.1% to 4.4% in February. However the stability of the index over the past seven months is unprecedented. The closet comparison is the first five months of 2014 when Inflation Expectations were 5.1-5.2% before trending lower in the latter half of that year.

“Although the headline figure has been remarkably stable in recent months, different employment and occupation categories have different views on the direction of inflation compared to this time last year.

“Australia’s Semi-Skilled/Unskilled workers (including farm owners and workers) now have clearly the highest Inflation Expectations of any occupation category at 4.9%, up a significant 0.5% in a year.

“In contrast Inflation Expectations over the past year have fallen for White Collar workers, down 0.1% to 4.3%, and for Skilled workers and Professionals/Managers, both down 0.3% to 3.8%.

“Analysing Inflation Expectations by Employment categories shows those in Private Industry have Inflation Expectations of 4.4%, down 0.1% on a year ago now just slightly higher than Public Service workers on 4.2%, up 0.4%.

“In contrast the Inflation Expectations of the Self-employed have fallen significantly to 3.3%, down 0.6%, and are now significantly lower than the national average.

“The take out from these figures is that different pressures are impacting different segments of the working population. Other indicators show that although the broader Australian economy remains strong – the latest ANZ-Roy Morgan Consumer Confidence is at an above average 117.4 and Roy Morgan Business Confidence has had its best start to a year since 2014 now at 120.0, there are still over 2.5 million Australians (18.6% of the Australian workforce) now unemployed or under-employed.

“The high level of unemployment and under-employment explains why Australian wage growth is lower than many would hope for in many industries which in turn leads to lower Inflation Expectations in certain industries and employment categories – led by Professionals/Managers, Skilled workers and the Self-Employed.”

This face-to-face Morgan Poll on Australian inflation expectations was conducted during the month of February 2018 with an Australia-wide cross-section of 3,984 Australians aged 14+.


Monthly Roy Morgan Inflation Expectations Index (2010 – 2018)

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

2018

4.5

4.4

4.5

Monthly
Average

5.0

4.9

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.