Updated 31 January 2025
The Consumer Price Index (CPI) rose to 2.4% p.a in the December 2024 quarter, headline inflation has been within the RBA’s target range for the second consecutive quarter since the pandemic.
Quarterly consumer price inflation rose by 0.2% in the December quarter 2024, resulting in an annualised inflation rate of 2.4%. This marks the lowest annual inflation rate observed since the first quarter of 2021.
The RBA forecast CPI to rise up to 3.7% by December quarter 2025 before falling throughout 2026, Treasury forecasts for the same period are lower.
The current annual and quarterly figures suggest inflation is falling faster than previous projections. This is the second quarter that headline inflation is within the RBA’s target range of 2-3%.
The Trimmed Mean Inflation (TMI), which offers a better reading of underlying inflation by excluding volatile items, was 3.2% in December, indicating that underlying inflation still is sticky and remains above the target band of 2-3%.
The Producer Price Index (PPI) – a measure of industrial prices – is easing trend in trend terms and slowed from 3.9% to 3.7% in the December quarter.
Key contributors to rising prices in the December quarter were alcohol and tobacco group (+2.4 %), recreation and culture (+1.5 %), insurance and financial services group (+0.8%), and communication (+0.5%). Price increases for other goods and services were largely offset by a 9.9% decrease in electricity costs, mainly due to the 2024-25 Commonwealth Energy Bill Relief Fund rebates available nationwide.
Annual goods inflation slowed to 0.8% in the December quarter, the lowest since 2016. The decrease in annual goods inflation was mainly driven by significant reductions in electricity and automotive fuel prices, along with the modest price increases for new homes.
Annual inflation for goods was 0.8% while services inflation remains elevated (4.3% p.a.) in December quarter 2024. Inflation has been higher for services than goods for the past year.
The Consumer Price Index (CPI) measures changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure by metropolitan households. Comprehensive CPI data is published by the Australian Bureau of Statistics quarterly, while a reduced price survey is conducted every month to supplement the quarterly data.
The Quarterly CPI measure is considered the more reliable indicator of inflation, as it measures all consumer prices. The monthly CPI measure is less accurate, but provides more timely insights on price changes that complement the quarterly release.
The Producer Price Index (PPI) measures changes in the price of industrial goods as they are produced. Some products – for example food – are measured in both the CPI and PPI indicators. PPI measures the price obtained by the producer, while CPI measures the price paid by the final consumer.
For more information from the ABS (including advice on using the CPI in contracts) see: https://www.abs.gov.au/statistics/detailed-methodology-information/information-papers/use-price-indexes-contracts
Ai Group Research & Economics Team
Website: Research and Economics Resource Centre
Email: economics@aigroup.com.au
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