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· Posted on
April 26, 2024

Australia's inflation rate slows to 3.6%, but it's still too expensive to eat breakfast cereal

RBA has just released the latest inflation results for the March quarter and inflation hit 3.6%, which was above the expected CPI of 3.5%.

What's the key learning?

  • When the cost of goods and services rises, workers often seek higher wages to keep up with increasing living expenses.
  • This cycle of wage rises followed by price increases can create a self-sustaining spiral.
  • While it’s lower than previous quarters, there are some products that are still very much in their inflation-era.

👉 Background: The Reserve Bank of Australia (RBA) tracks the cost of key goods and services in Australia every quarter to see whether prices inflating, remaining flat or deflating. This measure is called the Consumer Price Index (CPI).

👉 What happened: Now, the RBA has just released the latest inflation results for the March quarter and inflation hit 3.6%, which was above the expected CPI of 3.5%.

👉 What else: The annual inflation rate on bread, eggs and biscuits are all still hitting the 7%+ mark, while beer and breakfast cereals are still above 6%. All in all, this higher inflation rate means that it’s becoming unlikely that the RBA will drop the interest rate in 2024. The main reason? Labour costs have significantly increased.

What's the key learning?

💡 When salaries climb at the same rate as inflation, it can often keep the inflation cycle spinning.

💡 When businesses raise wages for workers, it has two flow-on effects:

  • The businesses will often offset these higher staff costs by increasing their prices.
  • The increased salaries mean that the demand for expensive products persist, leading to even further inflation.

💡 This ain’t the first wage-price spiral that Australia has experienced. We’ve seen it four times already: 1979, 1986, 2000 and 2010.

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