While inflation continues to be worryingly high, it may have peaked.
The Australian Bureau of Statistics’ latest data shows that inflation rose from 6.9% in October to 7.3% in November.
In early December, the Reserve Bank of Australia (RBA) forecasted that inflation would “peak at around 8%” in December.
If that’s the case, inflation may already be cooling – even though the next inflation announcement (of the December result) may show an increase on the previous period.
Inflation is expected to decline in 2023 “due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand”, according to the RBA, before falling further in 2024 to “a little above 3%”.
The RBA has said that high inflation “damages our economy and makes life more difficult for people”, so it’s determined “to re-establish low inflation and return inflation to the 2-3% range over time”.
What This Means for Consumers
Consumers can expect to see more of their wages going towards basic items such as groceries, housing and transport as prices for these goods and services rise.
This means that consumers with a mortgage may see their repayments reduced, and those with deposits may be able to earn more interest.
What This Means for Businesses
Businesses can expect to see a decline in demand for their goods and services as consumers pay more for essential items.
This may lead to a decline in profits, particularly in sectors such as retail and hospitality.
Businesses may also be affected by higher wages and rising energy costs, which could put pressure on their bottom line, so a business loan could be of great significance.
Why Inflation Is Important
Inflation is important because it affects the purchasing power of consumers and businesses.
When prices rise faster than wages, consumers have less money to spend, which can have an impact on economic growth.
Inflation also affects the value of investments, as the value of money declines over time.
For advice on how to take advantage of a decrease in inflation, contact Peel Finance Brokers. We can provide tailored advice to help you make the most of your finances in the years ahead.
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Terry Boag is the founder and CEO of Peel Finance Brokers and has been providing professional and loyal service to the Mandurah and southwest area for 25 years. With a long history of financial experience, Terry is reliable and dedicated to his clients, always ensuring the highest customer service and delivering strong lender relationships.