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Inflation Expectations drop 0.2% points to 5.3% in May, but are higher in the second half of May than the first

Source: Roy Morgan Single Source: May 2022, n=6,021. Base: Australians 14+.
In May 2022 Australians expected inflation of 5.3% annually over the next two years, down 0.2% points from April 2022 and down 0.5% points from the high of 5.8% reached in March 2022. However, since the Federal Election won by the ALP Inflation Expectations have increased in the last two weeks of May.

Inflation Expectations in May are a large 1.6% points higher than a year ago in May 2021 and clearly above the long-term average of 4.7%. The ‘pivot’ in the middle of the month indicates that the relief shown after the petrol excise was cut in late March had all but disappeared by the end of the month as petrol prices rose again to a nationwide average above $2 per litre.

Inflation Expectations are now almost as high in Capital Cities (5.2%) as in Country Areas (5.3%)

The usual gap between Inflation Expectations in Capital Cities (5.2%) and Country Areas (5.3%) had all but disappeared by May – a difference of only 0.1% points. Since January 2020 Inflation Expectations have been consistently higher in Country Areas (4.3%) than in Capital Cities (4.0%).

The smaller than usual gap is illustrated by differing situations around Australia. In Victoria and SA Inflation Expectations are higher in Country Areas than in the Capital Cities – including a significant difference of 0.9% points between Country SA (5.9%) and Adelaide (5.0%).

However, Inflation Expectations are higher in the Capital Cities than Country Areas in NSW, Queensland and WA. Although the gap is slight in NSW and Queensland it is significant in WA with Inflation Expectations of 5.2% in Perth compared to only 4.6% in Country WA.

Inflation Expectations by Capital Cities & Country Areas: May 2022

Source: Roy Morgan Single Source: May 2022, n=6,021. Base: Australians 14+. 

Inflation Expectations are highest in Tasmania & Queensland and lowest in Victoria

On a State-based level Inflation Expectations were again highest in the highly regional States of Tasmania (6.0%) and Queensland (5.5%).

Inflation Expectations were slightly higher than the national average in New South Wales (5.4%) and just below the national average in South Australia (5.2%), Western Australia (5.1%) and Victoria (5.0%).

Inflation Expectations Index long-term trend – Expected Annual Inflation in next 2 years

Source: Roy Morgan Single Source: Interviewing an average of 4,600 Australians aged 14+ per month (April 2010-May 2022).

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 down again in May, by 0.2% points to 5.3%, however the monthly figure hides the increase seen in the second half of the month as the measure again started to rise:

“Inflation Expectations dropped for a second consecutive month during May, down by 0.2% points to 5.3%, and down by 0.5% points since hitting a peak of 5.8% in March 2022. However, a closer look reveals the indicator was at only 5.2% in the first half of the month before increasing to 5.4% in the latter half of May.

“The impact of former Treasurer Josh Frydenberg’s decision to slash the petrol excise in half (22 cents + 2.2 cents GST – a total cut to the petrol price of 24.2 cents per litre) was still fresh in people’s minds in early May. However, by the end of the month the petrol price had again increased to an average of over $2 per litre in Australia’s Capital Cities – largely wiping out any benefit from the cut to the petrol excise.

“In addition, in recent weeks we have had shortages of gas along Australia’s East Coast sending the price of gas soaring for many manufacturing and industrial users of the energy. The soaring gas price is also putting upward pressure on electricity prices already feeling the strain with several coal-fired power stations out of action for repairs and maintenance.

“Along with the rising energy prices there are also shortages of key supermarket goods such as lettuce, tomatoes, beans, broccoli, spinach and other staples with many crops wiped out in the recent flooding events in Northern New South Wales and Southern Queensland.

“The combination of these factors are set to provide upward pressure to the prices of many key consumer goods for the next several months and we can expect the RBA to increase interest rates in response to the inflationary pressures in the months going forward.

“Already, in response to these inflationary pressures the RBA increased interest rates by 0.25% to 0.35% in early May, the first increase in official interest rates in more than a decade, and by 0.50% to 0.85% in early June, the largest increase to official interest rates in over two decades.

“The RBA has signalled that there are several more interest rates increases to come over the next few months with interest rates set to increase by a further 1-1.5% by the end of the year. If this occurs official interest rates will be 2-2.5% at year’s end, the highest they’ve been since 2015.”


The data for the Inflation Expectations series is drawn from the Roy Morgan Single Source which has interviewed an average of 4,700 Australians aged 14+ per month over the last decade from April 2010 – May 2022 and includes interviews with 6,021 Australians aged 14+ in May 2022.

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.

Monthly Roy Morgan Inflation Expectations Index (2010 – 2022)

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

4.5

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

4.5

4.3

4.5

4.3

4.3

4.3

4.5

4.3

4.2

4.4

2019

4.2

4.0

4.0

3.7

4.1

3.8

4.1

3.9

4.0

4.1

3.9

4.0

4.0

2020

3.9

4.0

4.0

3.6

3.3

3.2

3.4

3.2

3.3

3.5

3.4

3.6

3.5

2021

3.6

3.7

3.8

3.7

3.7

4.0

4.1

4.3

4.5

4.8

4.9

4.8

4.2

2022

4.9

5.1

5.8

5.5

5.3

5.3

Monthly
Average

4.7

4.7

4.8

4.8

4.7

4.7

4.7

4.6

4.7

4.7

4.6

4.7

4.7

Overall Roy Morgan Inflation Expectations Average: 4.7

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%.

RBA – Interest rate increasing cycle (2022):

2022
May 2022: +0.25% to 0.35%, June 2022: +0.50% to 0.85%.

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About Roy Morgan

Roy Morgan is the largest independent Australian research company, with offices throughout Australia, as well as in Indonesia, the United States and the United Kingdom. A full service research organisation specialising in omnibus and syndicated data, Roy Morgan has over 70 years’ experience in collecting objective, independent information on consumers.

Margin of Error

The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.

Sample Size

Percentage Estimate

40%-60%

25% or 75%

10% or 90%

5% or 95%

1,000

±3.0

±2.7

±1.9

±1.3

5,000

±1.4

±1.2

±0.8

±0.6

7,500

±1.1

±1.0

±0.7

±0.5

10,000

±1.0

±0.9

±0.6

±0.4

20,000

±0.7

±0.6

±0.4

±0.3

50,000

±0.4

±0.4

±0.3

±0.2