Inflation Expectations increased 0.3% points to 5.6% in March 2023 – the first monthly increase since November 2022

In March 2023 Australians expected inflation of 5.6% annually over the next two years, up 0.3% points from February 2023. The monthly increase in Inflation Expectations came before the RBA decided to pause (or perhaps even end) its cycle of interest rate rises in early April.

The monthly increase in March has been sustained in the first two weeks of April with weekly Inflation Expectations now at 5.6% in mid-April and averaging 5.6% over the last six weeks since mid-March.

The latest weekly Inflation Expectations are available each week in the Roy Morgan Weekly Update video available to view on YouTube.

Inflation Expectations had averaged only 5.3% during January and February – the lowest level for exactly a year since January and February 2022 (5.0%).

Inflation Expectations Index long-term trend – Expected Annual Inflation in next 2 years

Source: Roy Morgan Single Source: Interviewing an average of 4,800 Australians aged 14+ per month (April 2010-Mar. 2023).

Inflation Expectations were up in all mainland states in March

A look at Inflation Expectations on a State-based level shows rising Inflation Expectations across the Australian mainland in March although there was a significant decline in the island state of Tasmania.

Inflation Expectations were highest in South Australia at 5.9% (up 0.9% points from a month ago) in March ahead of New South Wales at 5.7% (up 0.3% points) and Queensland also at 5.7% (up 0.1% points).

In contrast, Inflation Expectations were below the national average in Victoria at 5.3% (up 0.1% points), Tasmania at 5.3% (down 1.1% points) and Western Australia at only 5.1% (up 0.3% points).

Looking at the divide between Country Areas and the Capital Cities shows increases for both in March with Inflation Expectations in Country Areas at 5.8% (up 0.4% points on a month ago) still significantly higher than in Capital Cities at 5.4% (up 0.3% points).

Roy Morgan CEO Michele Levine says Inflation Expectations have increased over the last six weeks and were up 0.3% points in March to 5.6% - the first monthly increase since hitting a 11-year monthly peak of 6.5% in November 2022:

“It appeared Inflation Expectations had peaked in November 2022 at 6.5% after rising consistently for over two years since hitting a record low of only 3.2% in mid-2020. This view aligns with commentary provided by the RBA as well many media commentators and economists when assessing inflation in the Australian economy.

“Since then, Inflation Expectations fell quickly by 1.2% points over the next two months – the largest two-month fall on record. The new monthly ABS annual inflation indicator subsequently fell from a peak of 8.4% in December 2022 to 7.4% in January 2023 and 6.8% in February 2023 – an even steeper fall of 1.6% points in two months.

“However, after falling rapidly around the Christmas-New Year holiday period, Inflation Expectations stabilised earlier this year and have now increased since early March. The weekly ANZ-Roy Morgan Inflation Expectations have now averaged 5.6% over the six weeks from mid-March to mid-April and have matched the monthly figure for March covered in this release – also 5.6%.

“The ABS is set to release both its March quarter CPI and latest monthly inflation indicator next week which will play a large role in determining whether the RBA keeps interest rates unchanged or resumes hiking at its next meeting in early May.

“Over the past few years, we have seen Inflation Expectations play a key role by being a leading indicator of the official ABS inflation statistics. If this trend continues, we could see conflicting results next week with the ABS quarterly inflation figure falling while the more frequent ABS monthly indicator increases in March. However, given the time-lag, the recent increases in Inflation Expectations may not show up until the ABS releases monthly figures for April in the final week of May – in six weeks time!

“This extended time lag is important as the RBA meeting in early May, and the subsequent Federal Budget, may be handed down with the assumption inflation is under control – only for the ABS figures released a month later to show this is not the case.

“We urge the RBA and other policy makers to watch the ABS Inflation figures, and especially the latest monthly figures, closely next week – and take seriously the results from the ANZ-Roy Morgan Inflation Expectations in recent weeks that show inflationary pressures re-emerging in the economy.

“Another indicator of increasing inflationary pressures is the average price of a litre of petrol which last week hit $1.91 per litre – the highest retail price for five months.”

See below for a comprehensive list of RBA interest rate changes during the time-period charted above.

The data for the Inflation Expectations series is drawn from the Roy Morgan Single Source which has interviewed an average of around 4,900 Australians aged 14+ per month over the last decade from April 2013 – March 2023 and includes interviews with 5,987 Australians aged 14+ in March 2023.

For comments and information about Roy Morgan’s Inflation Expectations data, please contact:

Roy Morgan Enquiries
Office: +61 (3) 9224 5309
askroymorgan@roymorgan.com