Consumers less anxious about inflation

Consumers appear less concerned about the carbon tax having a lasting impact on inflation than they were over the introduction of the GST 12 years ago.

New data released on Thursday shows consumers’ worries over future price pressures subsided in the past month to levels not seen in nearly four years.

The Melbourne Institute’s consumer inflation expectations survey for November - which gauges the views of households on the consumer price index over the next 12 months - was 2.2 per cent, down from 2.7 per cent as of October.

This was lowest survey outcome since early 2009 and predicts inflation will be at the bottom end of the Reserve Bank of Australia’s (RBA’s) two to three per cent inflation target.

The central bank should draw comfort from this result after the inflation spike in the September quarter.

‘‘This provides the RBA with a bit of room to stimulate growth should (downward) risks coming out of Europe, the US and China increase,’’ Melbourne Institute research fellow Viet Nguyen said.


Strong inflation expectations can themselves drive up prices as people seek higher wages in compensation.

The Consumer Price Index (CPI) jumped 1.4 per cent in the September quarter, which lifted the annual rate to 2.0 per cent.

Dr Nguyen said the increase in the official CPI for the September quarter confirmed the elevated inflation expectation readings between July (3.6 per cent) and September (2.5 per cent).

Economists at Westpac said the looming carbon tax may have boosted inflation expectations before its introduction on July 1.

‘‘But it has had a minimal impact compared to the introduction of the GST in 2000 and the inflation run-up in 2007 and 2008,’’ they said in a note to clients. ‘‘All told, inflation expectations not only remain well contained but are starting to ease.’’

Westpac suspects falls in petrol and fresh fruit and vegetable prices may be having an impact.

At the same time, the net balance of households expecting price rises versus those expecting price falls continues to decline, suggesting declining price pressures are being felt.

When the GST was being introduced, inflation expectations jumped above four per cent, and during the 2007-08 price surge the predictions soared towards six per cent.

Other data showed motor vehicle sales eased 2.8 per cent to 95,720 vehicles after a 4.6 per cent jump in September to a record high.

Commonwealth Securities economist Savanth Sebastian said despite this pullback, sales figures remained encouraging, with a record 300,681 SUVs sold in the 12 months to October.

‘‘Car affordability is at the best levels since the 1970s, and coupled with the recent rate cuts it seems to have prompted consumers to update their rides,’’ Mr Sebastian said.

‘‘The recent pickup in consumer confidence is encouraging, and provided it is sustained, it will lead to further big-ticket purchases over coming months.’’

Meanwhile, Opposition Leader Tony Abbott has set a target for a coalition government of doubling the rate of new small businesses to 30,000 a year.

‘‘Under the current government there are just 15,000 more small businesses at the end of every year and they are employing fewer people,’’ Mr Abbott told the Menzies Research Centre Small Business Forum in Melbourne.