Is Inflation Under Control? A Closer Analysis

Sep 26, 2023

Unless you’ve been fortunate to not have to pay any bills, you would have noticed the accelerating increase in prices of everyday items in Australia. In fact, in 2022, international inflation rates were at their highest since the 1980s.

Inflation itself is nothing new, but is the inflation we’re experiencing now cause for concern? The short answer is: yes… and no. Let’s take a closer look.

What’s causing inflation?

Most economists trace our current inflation back to the 2020 pandemic, which caused a disruption in the supply chain and a loss of trading opportunities. This, along with government attempts to stimulate the economy, pressured consumer pricing, which led to inflation.

Most of the economic results of the pandemic had begun to subside when the war between Russia and Ukraine threw the economy into turmoil once again. Because Russia is a major supplier of oil, gas and metal and both countries are major suppliers of corn and wheat, the supply chain experienced further disruptions.

In Australia, we’ve seen this play out in rising fuel prices, as well as an increase in the cost of transporting goods. Agricultural, mining and energy prices are also on the rise, which can drive up food prices.

Is inflation going to get worse?

 According to the Organisation for Economic Co-operation and Development (OECD), core inflation is likely going to continue in many countries, including Australia. OECD estimates an Australian inflation rate of 5.9% in 2023 and 3.3% in 2024.

However, this doesn’t necessarily mean we’ll see a price rise across the board. The cost of items like food, fuel and other forms of energy could drop, even if pricing for other goods and services continues to rise.

The good news

 In July, inflation dropped from 5.4% to 4.9%, which could be reason for optimism. Another good sign is the continuing cash rate of 4.1%, which the Reserve Bank of Australia (RBA) chose to keep steady at their September meeting.

Many economists agree that inflation in Australia has peaked, remain steady and then may fall. The RBA aims to have inflation back in its target range (2-3%) by the end of 2025.

According to Treasurer Jim Chalmers, although the international economy may be unpredictable, our economy is in a good place at the moment: with a strong labour market, rising wages, and high prices for outgoing goods.

So, is inflation really under control? Not necessarily—or at least, not yet. While the current inflation rate may be cause for concern, it’s not cause for panic. Yes, prices are high, and they may continue to be high for a while. But there’s also reason to hope that prices will start falling again soon, and for the moment, at least, the economy is in a positive place.


All of the material published on this web site is for information purposes only and does not constitute advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a Financial Adviser, whether the information is appropriate in light of your particular needs and circumstances

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