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Inflation Expectations down again in March before Federal Budget in early May

Source: Roy Morgan Single Source: Interviews with an average of 4,000 Australians per month aged 14+ (April 2010 – March 2018).
In March Australians expect inflation of 4.3% per year over the next two years. This is down 0.1% from a month ago, the second straight monthly fall, and also down 0.1% on a year ago in March 2017.

Inflation Expectations have now fallen for two consecutive months for the first time since June 2017 and are lower year over year for the first time since December 2016.

Analysing Inflation Expectations by political affiliation shows it is ALP supporters driving the fall with the Inflation Expectations of L-NP supporters unchanged on a year ago and Greens supporters now with slightly higher Inflation Expectations. These pre-Budget Inflation Expectations are covered in detail later in the release.

Following these consecutive decreases Inflation Expectations are now well below the seven year average of 5.0% and the March Inflation Expectations are based on a nationwide face-to-face survey of 3,969 Australians aged 14+ interviewed in March.


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

Roy Morgan Inflation Expectations Index - March 2018

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


Inflation Expectations by State again highest in Victoria but now lowest in NSW

Analysis of Inflation Expectations by State shows Victorian Inflation Expectations remain the highest in Australia at 4.8% above Queensland on 4.6%. Inflation Expectations in both South Australia and Tasmania are at 4.4% marginally above the national average of 4.3%.

Inflation Expectations in New South Wales fell significantly in March to 4.1% and are now the lowest in the nation just below Western Australia at 4.2%.

Western Australia has consistently had the lowest Inflation Expectations in the nation in recent years following the end of the mining boom although the recent pick-up in Inflation Expectations, and Business Confidence in Western Australia (see latest Business Confidence release here), are powerful indicators that the state’s economy is finally recovering.


L-NP supporters usually have the lowest Inflation Expectations

Analysing Inflation Expectations by political party support since the L-NP Government was elected in September 2013 shows L-NP supporters usually have the lowest Inflation Expectations of any supporters.

In the March quarter 2018 L-NP supporters had Inflation Expectations of 3.9% which was unchanged on a year ago. However, L-NP supporter Inflation Expectations are up more than half-a-percent since reaching a low of 3.3% in the three months to October 2016 around the time of the last Federal election.

Greens supporters have Inflation Expectations of 4.0% in the March quarter 2018, only slightly higher than L-NP supporters, and up 0.2% from a year ago. Inflation Expectations for Greens supporters tend to closely track those of the L-NP and dipped below L-NP supporters occasionally in 2017.

Since the election of the L-NP Government ALP supporters have consistently had higher Inflation Expectations than either L-NP or Greens supporters, now at 4.4% in the March quarter 2018. Inflation Expectations for ALP supporters are down 0.2% on a year ago and remain well below the high of 5.6% reached in mid-2014.

In recent years it is supporters of Independents/Others that have consistently had the highest Inflation Expectations of any supporters, now at 5.1% in the March quarter 2018 and up 0.4% on a year ago.


Inflation Expectations by Political Party Support (September 2013 – March 2018)

Inflation Expectations by Political Party Support - September 2013 - March 2018

Source: Roy Morgan Single Source rolling quarterly average. Average quarterly interviews Australian electors, n=10,500.


Michele Levine, CEO, Roy Morgan, says Inflation Expectations have now fallen for consecutive months and are now lower than a year ago for the first time since December 2016:

“Roy Morgan Inflation Expectations are down 0.1% to 4.3% in March and also 0.1% lower than a year ago. The consecutive falls indicate that the recent stability in Inflation Expectations appears over as we head towards next month’s Federal Budget – due to be handed down on Tuesday May 8.

“Analysing Inflation Expectations by political affiliation reveals that L-NP supporters have consistently the lowest Inflation Expectations of any supporters – now at only 3.9% in the March quarter 2018 and unchanged on a year ago.

“The low Inflation Expectations of L-NP supporters indicate a level of comfort with the current economic environment that is favourable to the Government as it prepares to hand down what may be the last Federal Budget before an election later this year or early in 2019.

“In contrast to L-NP supporters ALP supporters’ Inflation Expectations tend to closely track the overall figure and are therefore significantly higher than their L-NP counterparts. ALP supporters have Inflation Expectations of 4.4% in the March quarter 2018, although this is down 0.2% on a year ago.

“The counter-point to the L-NP supporters is found amongst those who choose to vote for Independents/Others or can’t say who they would vote for – both of which groups have consistently higher Inflation Expectations than supporters of the major parties, or even the Greens. Those who plan to vote for Independents/Others have the highest Inflation Expectations of all at 5.1%.

“This perception of higher inflation which is usually associated with tougher economic times is no doubt part of the reason these electors choose to support minor party candidates. At the 2016 Federal Election a record higher 22.9% of Australians opted to support a minor party candidate of one sort or another.”

This face-to-face Morgan Poll on Australian inflation expectations was conducted during the month of March 2018 with an Australia-wide cross-section of 3,969 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 4.3

4.4

Monthly
Average

5.0

4.9

5.0

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.

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