The Consumer Price Index (CPI) rose by 1.0 per cent over the three months to March 2024, which was higher than the December quarter increase of 0.6 per cent. In positive news, the annualised inflation rate continues to fall, and is down from 4.1 per cent in December 2023 to 3.6 per cent as at March 2024.

Price rises for tradeable goods continue to ease at a faster pace than non-tradeable goods, as consumers continued to pull back on discretionary spending. A very tight residential rental market has resulted in the highest annual rate of inflation for rents since 2009.

Rental inflation is likely to remain high for some time yet, as vacancy rates are very tight, and interest rates remain high. Rising education costs at both secondary and tertiary levels were also big contributors to the inflation rate, as educational institutions adjust their pricing at the start of the school year.

While a fall in the inflation rate is welcome news, today’s figure is unlikely to bring forward a cut to the cash rate, as services inflation continues to fall at a slow pace. This means that businesses should brace themselves for the cash rate to remain at 4.35 per cent, at least until the fourth quarter of 2024.

The longer interest rates remain high, the more difficult trading conditions will be for the discretionary retail trade, food and beverage and construction sectors, and we expect a continuation of rising insolvency rates in these sectors as a result.