Inflation Sinks Below Reserve Bank's Target

Key Statistics

• Before the pandemic, the inflation was 2.3% however during the pandemic jumped to 3.5%.
• The closest we have been to the inflation target of 3% was 3.5% in 2008.
• Inflation rates are expected to continue to decrease in the coming months.

What is Inflation and How is it measured?

Inflation is the rate at which the prices of goods and services increase over time. It is measured by the Consumer Price Index (CPI), which tracks the prices of a basket of goods and services that are purchased by households. The CPI is calculated by the Australian Bureau of Statistics (ABS) on a monthly basis.

How is inflation controlled?

The Reserve Bank of Australia (RBA) is responsible for controlling inflation in Australia. The RBA uses a variety of tools to control inflation, including interest rates, quantitative easing, and forward guidance.

What Caused Inflation to Rise During the Pandemic

There are several factors that contributed to the rise in inflation during the pandemic. These include:

• Increased demand for goods and services as people spent more time at home.
• Disruptions to supply chains due to lockdowns and travel restrictions which made it difficult to get goods to market.
• Government stimulus measures, such as JobKeeper and JobSeeker, which put more money into the economy.

The Impact of Inflation on the Economy

Inflation can have a significant impact on the economy. High inflation can lead to:

• Reduced purchasing power for consumers.
• Increased uncertainty for businesses.
• Social unrest.

The Outlook for Inflation

The outlook for inflation is uncertain. However, the RBA expects inflation to continue to decrease in the coming months. This is due to a number of factors, including:

• The easing of supply chain disruptions.
• The winding down of government stimulus measures.
• The RBA's commitment to keeping inflation under control.