In December Australians expected inflation of 3.6% annually over the next two years, up 0.2% points from November and up 0.4% points on the record low in August. Inflation Expectations are now at their highest since the very beginning of the COVID-19 pandemic in April 2020.
Inflation Expectations have increased sharply since hitting the record low in August and a look at different occupation and employment categories shows increases across the spectrum.
Australians who aren’t employed (retired, home duties, students and unemployed) have higher Inflation Expectations at 4% than those who are employed (3.4%), but the gap has narrowed since August.
For those who are employed it is Skilled workers who now have the highest Inflation Expectations at 3.9% - and the biggest increase (+0.9% points) since August. Inflation Expectations for White Collar workers (3.8%) and Semi/Unskilled workers (3.7%) are both above the national average while it is Professionals/Managers who have the lowest at 3% - although all are up significantly since August.
A look at Inflation Expectations by employment category also tells a story with self-employed Australians having easily the highest at 3.7% - up a full 1% point in only four months. People in Private Industry have Inflation Expectations of 3.4% (up 0.4% points since August) and those in Public Service have lower still at 3.3% (up 0.6% points).
Inflation Expectations by Occupation & Employment Category August 2020 cf. December 2020
Source: Roy Morgan Single Source: Aug. 2020, n=6,119 and Dec. 2020, n=7,662. Base: Australians aged 14+.
WA Inflation Expectations increase the most (and now the highest) as Australia opens up
Although there were some reversals, with outbreaks of COVID-19 in New South Wales and Victoria that now appear contained, Australia continued to open up during December with restrictions lowering and borders between States coming down.
Because of these trends it is probably not surprising that WA, which was the only State to report a State Budget surplus last year and has dealt extremely successfully with COVID-19 while maintaining a hard border closure has experienced the largest rise in Inflation Expectations over the last few months, up by 1.3% points to 4% since August and now the highest of any State.
Slightly above the national average are the two smallest States of Tasmania on 3.8% (up 0.4% points since August) and South Australia on 3.7% (up 0.5% points).
Inflation Expectations are in line with the national average in New South Wales at 3.6% (up 0.3% points since August), Victoria on 3.6% (up 0.4% points) and Queensland on 3.6% (up 0.2% points). Inflation Expectations in both the ACT and NT continue to be lower than the national average and both are now below 3%.
On a regional basis Inflation Expectations are higher in Country Areas and are now at 3.8% (up 0.3% points since August) but rising faster in Capital Cities now on 3.6% (up 0.5% points).
Inflation Expectations Index long-term trend – Expected Annual Inflation in next 2 years
Source: Roy Morgan Single Source: Interviews an average of 4,500 Australians aged 14+ per month (April 2010 – Dec. 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 have continued to increase and were at 3.6% in December, up 0.4% points from their record low of 3.2% in August: