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Rising rents is driving inflation, leaving Australia with uncertain future


The Reserve Bank of Australia (RBA) recently raised interest rates due to growing concerns about inflation, which has been exacerbated by rising rents. Treasurer Jim Chalmer's has lauded the impact of the Albanese government's policies in bringing down headline inflation. However, the impact from electricity price inflation will be felt in the fourth quarter consumer price index (CPI). Additionally, residential housing rents are expected to add up to around 1 percentage point to the headline CPI figure, making it difficult for the RBA to fight against inflation. Waleed Aly also commented that Australia is at breaking point, and that this could lead to a big change in Australian Christmas shopping habits this year. Despite 55,000 jobs added to the economy in September, the unemployment rate rose due to a jump in the participation rate.


What are the RBA's inflation forecasts for the end of 2024 and 2025?
The RBA's inflation forecasts for the end of 2024 and 2025 are 3.5 per cent and the top end of the 2-3 per cent target range, respectively.

What impact have the various subsidy schemes had on headline inflation?
The various subsidy schemes have helped to suppress the headline CPI figure. If not for the impact of these policies, quarterly inflation would have been around 1.7 per cent, instead of 1.2 per cent, and the annual inflation figure would have been around 5.9 per cent, instead of 5.4 per cent.

What is causing residential housing rents to remain high?
Residential housing rents are remaining high due to the lagged effect of subsidy impacted CPI components, as well as the 15 per cent increase in the maximum rate of Commonwealth Rent Assistance.

What could the reweighting of the CPI at the end of the year have on rental prices?
The reweighting of the CPI at the end of the year could potentially add further upward pressure to rental prices.

What does Waleed Aly say about Australia's current situation?
Waleed Aly says Australia is at breaking point as “wrong people” are burdened with fixing it.

AI Comments

👍 Tarric Brooker's insightful article provides a detailed breakdown of the complex economic issues facing Australia and the potential impacts of rising rents on inflation.

👎 Tarric Brooker's article fails to provide any solutions to the economic issues facing Australia, leaving the reader without any concrete answers.

AI Discussion

Me: It's about how rising rents are driving inflation, leaving Australia with an uncertain future. It notes that the inflation that's being caused by rising rents could add up to around one percent to the headline CPI figure, which would put the RBA's target range at risk. The article also talks about how the government's subsidies have helped to suppress the headline CPI figure, but have only delayed the impact of electricity price inflation, which is expected to hit in the fourth quarter of this year. Finally, it notes that the re-weighting of the CPI set to occur at the end of the year could further add to inflation.

Friend: Wow, that's really concerning. It's hard to imagine how much this could affect the economy.

Me: Yeah, it's definitely a cause for concern. The article mentions that the inflation caused by rising rents could cause the RBA's target range to be put at risk, and that the re-weighting of the CPI could further add to inflation. It's clear that this could have a serious impact on the economy, and it's concerning to think about how this could affect Australian households.

Action items

Technical terms

Reserve Bank Australia (RBA)
The central bank of Australia, responsible for setting the nation's monetary policy and regulating the banking system.
Consumer Price Index (CPI)
A measure of the average change over time in the prices paid by consumers for a basket of goods and services.
Commonwealth Rent Assistance (CRA)
A government payment to help people on low incomes with their rent.
Energy Bill Relief Fund
A government fund to help households with their energy bills.
Headline Inflation
The rate of inflation as measured by the Consumer Price Index.
Aggregate Demand
The total demand for goods and services in an economy at a given time.

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