The Australian Bureau of Statistics (ABS) has released its October inflation figures, revealing that the Consumer Price Index (CPI) held steady at 2.1% in the year to October 2024. While this figure aligns with the Reserve Bank of Australia’s (RBA) preferred 2-3% target range, the story doesn’t end there. Experts widely anticipate that the RBA will maintain the current cash rate of 4.35% a little longer into 2025, relying on more nuanced data to guide their decision-making.
Inflation measures how the prices of key goods and services change over time. For instance, if a grocery bill was $100 last year and $103 this year, the inflation rate for groceries is 3%. CPI averages these individual inflation rates across a wide range of products and services to produce a single, comprehensive figure.
But averages can be misleading. Think back to high school statistics: datasets can be measured by either the mean (average) or the median (centre point). While the median is less influenced by extreme values, the mean can be skewed by outliers.
For example, consider the numbers 1, 18, 19, 20, and 22. The median is 19, a value reflective of the dataset, while the mean is 16, a less accurate representation. To address this issue, economists use a “trimmed mean,” which excludes the highest and lowest data points to provide a clearer picture of overall trends. In the above example, a trimmed mean calculated on 18, 19, and 20 yields an average of 19—much more aligned with the dataset.
In October, falling fuel and electricity costs, partly due to government incentives, contributed to the overall inflation rate of 2.1%. However, the trimmed mean, which excludes volatile extremes, tells a different story, rising to 3.5% from 3.2% in September. This increase suggests that price pressures remain across many goods and services, keeping inflation above the RBA’s comfort zone despite the headline figure.
As the RBA prepares for its final meeting of the year in December, this trimmed mean figure will likely weigh heavily in their decision to hold rates steady. Although a reduction in interest rates may still be months away, the groundwork for eventual rate cuts is being laid, with financial institutions beginning to adjust their strategies.
While higher interest rates may feel like a hurdle, they also present an opportunity. Historically, when interest rates drop, the property market experiences increased demand as borrowing capacities rise and loans become more affordable. This uptick in demand often leads to higher property prices and stiffer competition among buyers.
Entering the property market now allows you to position yourself ahead of these trends. By securing a property before rates decrease, you can potentially avoid the price hikes and heightened competition that 2025 is expected to bring. With the right strategy, this could be the ideal time to invest in property.
The current economic landscape is filled with opportunities for savvy property investors. By acting now, you can position yourself to capitalise on potential rate cuts and the benefits they bring to the property market. At The Property Mentors, we specialise in helping investors navigate these complexities to build successful property portfolios.
Contact us today to discuss how we can support your property investment journey. Let’s secure your future before the market shifts.
Want to learn more about inflation, interest rates, and property investing? Speak to one of our mentors today.
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