Inflation eases more than expected
Good news, as inflation fell further than expected in November.
The monthly index has had already dropped from 5.6 per cent in September, to 4.9 per cent October...and now to 4.3 per cent in November.
That's a 2-year low, and is now lower than the cash rate target of 4.35 per cent, ultimately portending lower interest rates ahead.
Inflation was still high for airfares, rents, and some services costs in November, and there was a reacceleration in the price of new housing (albeit surely this will cool in 2024).
But generally the rate of inflation is falling faster than expected.
Indeed, trends in Australia are following a similar trajectory to the US and Canada, but lagging 6 months behind, due to our extended international border closures.
We're also about 2 months behind UK and the Eurozone, which have experienced large declines in inflation rates lately.
Other analytical measures of inflation also continue to fall.
In fact, excluding volatile items, 3-month annualised inflation was 3.1 per cent, which is basically back at the target level.
Inflation has become such an ingrained part of the economic debate over the past year that people will no doubt be very quick to point out that some prices are still rising fast.
Insurance is a good illustrative example, with some shocking price increases still working their through.
But that's the way inflation measures always work - some prices are going up, while others are going down.
Looking ahead, I'm certain that international airfares must reverse their recent spikes, and we already know that fuel prices fell significantly in December.
We're also seeing some consumer price discounting in the new year already, including at Coles and elsewhere.
Overall, this was a slightly brighter result than expected, which keeps inflation on track to fall back to the target 2 to 3 per cent range.
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One area I'm less sure about is rents.
I keep reading that rental price inflation has peaked - which may be true - but there are still some significant pressures in the rental market, with population growth continuing to rampage along.
Rents increased strongly in 2023 in Perth (+20 per cent), Melbourne (+18 per cent), and Sydney (+17 per cent), according to PropTrack, and asking rents are continuing to rise.
Engineering construction is booming back towards all-time highs, which evidently won't help capacity in the homebuilding sector.
Public works have exploded, especially in New South Wales, where engineering construction activity is up by more than +30 per cent year-on-year to a record quarterly level of $10 billion.
Engineering work is also booming in Western Australia as mining thrives again.
There will still be plenty of jostling to quality rentals in 2024, even if the rate of rents inflation cools.
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