With all the attention on the quarterly inflation rate, people may be overlooking that the inflation figures for the month of June also came out today. The monthly inflation figures are less accurate than the quarterly figures but they do give us a look at where inflation is heading.

The latest monthly figures show inflation for the year was just 1.9%. Yep, you read that right. This means that inflation has fallen outside the RBA band.

You might think this is good. After all, isn’t low inflation a good thing?

The problem is that when inflation get too low, it comes with a stagnating economy, and higher unemployment. You know… like what is happening in the Australian economy right now.

The most recent economic growth figures were just 0.2% for the March quarter. Unemployment jumped up to 4.3% for June. The highest since the economy was gripped by the pandemic.

These monthly figures highlight again that the risk is a stagnating economy. The inflation dragon is dead.

Greens senator David Shoebridge said yesterday he would keep his motion for an inquiry into the Aukus deal on the senate books until it had the numbers. He still doesn’t have the numbers but he is working on building more public support

The senate is making its way through the amendments on the cutting student debt bill; it is up to Liberal senator Sarah Henderson’s amendment to index the loans, which she is doing as her own amendment, rather than one coming from the Liberal party.

You can expect Henderson to do more of this stuff given she has been booted from the shadow front bench.

Jim Chalmers is obviously celebrating – he is about to head into the Sky News studios to talk inflation ahead of question time, where he will take a dixer on it.

One of the reasons the politicians choose Sky to talk to is because it is on in every parliament house office. So it is not a huge audience, but it is an influential one.

The inflation rate has fallen again. It is now at 2.1%, down from 2.4% last quarter. Inflation is now at the very bottom of the RBA’s target band of 2% to 3%.

The inflation rate is now at risk of falling outside the target band, but not because it’s too high, but because it’s too low.

This result shows the RBA made the wrong call earlier this month when it left interest rates on hold. The inflation rate has now been in the target band for a year. With the economy slowing and unemployment rising, now is the time to cut rates. The RBA’s failure to do this is becoming more and more obvious each day.

While the RBA’s targets the headline rate of inflation, which has fallen to 2.1%, it has increasingly been talking about the trimmed mean, or underlying rate of inflation. This is the inflation rate with the volatile bits stripped out. Because it has stripped out the volatile bits it tends to move more slowly than the headline rate. But it too has continued to fall. It has fallen every quarter for a year and now sits at 2.7%.

The RBA needs to admit that it’s continued concerns that low unemployment might lead to a wages breakout and higher inflation are a fantasy. Their outdated understanding of the economy needs to be thrown out. They should be taking an evidenced based view of what is actually happening. The evidence is clear. Interest rates need to be cut.

We will have more on the inflation data for you soon, but here is the ABS graph:

And here is the ABS take on the quarterly inflation data:

The main contributors to the quarterly rise were Housing (+1.2 per cent), Food and non-alcoholic beverages (+1.0 per cent), and Health (+1.5 per cent). Partially offsetting the rise was a fall in Transport (-0.7 per cent).

The quarterly growth in Housing was driven by Electricity (+8.1 per cent). The second instalments of both the Commonwealth Energy Bill Relief Fund and State government rebates in Perth were used up by households in the previous quarter. Rebates have the effect of reducing electricity costs for households. This has meant higher out-of-pocket electricity costs this quarter as rebates have been used up. 

Brisbane also contributed to the June quarter rise as households in Queensland continued to use up the $1,000 State government rebate.

‘While electricity was up this quarter, it’s down 6.2 per cent compared to 12 months ago as rebates remained in place for most capital cities,’ Ms Marquardt said.

The rise of 1.0 per cent in Food and non-alcoholic beverages was driven by fruit and vegetables (+4.3 per cent). Strawberries, blueberries, grapes, tomatoes and cucumbers saw price rises following reduced supply, which is typical at this time of year. 

Health costs were up 1.5 per cent this quarter driven by a rise in Medical and hospital services (+2.3 per cent) following the annual increase in private health insurance premiums on 1 April.

The fall of 0.7 per cent in Transport was driven by Automotive fuel (-3.4 per cent), reflecting lower global oil prices. ‘Prices for automotive fuel have fallen in three of the past four quarters and are 10.0 per cent lower compared to 12 months ago,’ Ms Marquardt said.

Grogs has other thoughts on the sound you are hearing:

The ABS has just released the inflation for the last quarter – 2.1%

That sound you hear is the whoop from Jim Chalmer’s office

Did the ex-PC boss miss the recent Aged Care Royal Commission? In an article in this morning’s Financial Review, Ryan Stokes  appears to be calling for “flexibility” of staff ratios in aged care and other care and support services. 

This is a recipe for poorer quality and safety, and neglect and abuse of vulnerable adults and children.

There is plenty of evidence underpinning the introduction and strengthening of  staff ratios in aged care and other services, such as early childhood education and care.

Capital investment, decent wages, staff training, and career paths that increase capability and reduce turnover can increase productivity in these sectors.

Playing around with minimum care requirements may cut  labour costs but the only benefit is likely to be increased profits – we know this from the 1000s of pages of evidence heard by the Royal Commission.

Further to Amy’s earlier post on wealth taxes.

Today the Financial Review reported on a new poll by SEC Newgate Research that showed almost two-thirds of voters would support income tax cuts funded by higher taxes on wealth. They also supported increased taxes on landlords with multiple investment properties.

Then distribution of private wealth in Australia is extremely skewed in favour of the rich, and it is getting worse. In August last year the Australia Institute published a report Wealth and inequality in Australia which outlined how wealth has grown in recent decades. It found the growing disparity between inequality of incomes and inequality of wealth is increasing the rich-poor divide in Australian society.

Capital gains on the wealth have been higher than wages, salaries and supplements for the whole economy. Those capital gains go towards increasing wealth inequality. The wealth of just the top 200 rich is now $668 billion or a quarter of annual GDP up from 8% two decades earlier.

Household wealth in Australia has increased from $4.4 trillion 20 years ago to $17.3 trillion now. Almost all of the increase was due to capital gains, very little out of household savings. So don’t let the rich try to say they got that way through hard work.

The rich could have achieved almost all of the incredible gain without getting out of bed yet they pay next to nothing by way of tax. That has to change.