Latest inflation figures show the rate cycle is close to peaking

This week’s quarterly inflation figures are the lowest since September 2021.

After last week’s very low unemployment figure, we knew this week’s quarterly inflation figure would play a critical role in the next RBA decision… it had to offset the tight labour market.

And it did. The June quarter CPI was 0.8 per cent and 6 per cent for the year. Economists were expecting the quarterly rate at 1 per cent and the annual rate is down 1 per cent from the previous quarter.

It turned out to be the lowest quarterly result since September 2021. Also, expect the next quarter’s annual rate to benefit from September 2022’s whopping 1.8 per cent result dropping out of the annual cycle.

It’s good news, but the Reserve Bank is also looking for today’s retail sales figures to be subdued as well.

Price inflation for “goods” continued to slow, but price inflation for “services” accelerated because of wage rises.

By goods, they mean price rises for things like food, household appliances, clothing and furniture has slowed.

Accelerating services inflation is being driven by rents, restaurant meals, childcare, international travel and accommodation (which is why Qantas shares are doing so well along with Flight Centre, Corporate Traveller and Webjet), plus insurance.

Anyone who is renting at the moment knows exactly how much rents are rising. If you don’t, take a look at these graphs. The rent rises are getting so bad that is seems a lot of renters are moving home or buying a property to ease the pain.

Source: IFM Investors

When it comes to capital cities, rental increases in Perth and Brisbane have been leading the way, but most cities are posting big rises.

Source: IFM Investors

Insurance, which is heading to record levels, was the other big inflation driver. So insurance companies are benefitting from increased premiums and the bonus from rising interest rates on their investment portfolios.

On my sharemarket investment program The Call (www.ausbiz.com.au) this week, listed insurance broker’s AUB and Steadfast came up for our expert panels to analyse. Their one-year and 5-year price charts are both, well, off the charts. Both are benefitting from the premium rises because their commissions are a percentage of the premium… the higher the premium, the higher their commission.

Source: IFM Investors

If you’re feeling the pinch, there are a few things you can do to stay on top of your mortgage or rent payments:

Do your sums and maybe look at a cocktail of fixed and variable home loans to suit your budget.
Revisit the household budget and see what costs could be trimmed to free up extra cash.
In this period of labour shortage, look at a side hustle to earn extra cash.
If you’re feeling stressed about your finances, it’s a good idea to talk to a financial counsellor.

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