Reserve Bank of Australia will be concerned by consecutive increases in Inflation Expectations in late May and early June
By Michele Levine, CEO, Roy Morgan, Gary Morgan, Executive Chairman, Roy Morgan & Julian McCrann, Morgan Poll Manager.
The Reserve Bank of Australia (RBA) increased interest rates by +0.25% to 4.1% at its June meeting earlier this week. Official Australian interest rates are now at their highest for over a decade.
As part of its media statement accompanying this month’s decision the RBA stated that:
“The Board remains alert to the risk that expectations of ongoing high inflation contribute to larger increases in both prices and wages, especially given the limited spare capacity in the economy”
The RBA’s reference to concerns about Inflation Expectations is well founded. The ANZ-Roy Morgan Inflation Expectations released weekly, and with in-depth analysis released monthly, have proven to be a reliable leading indicator of the future direction of the official ABS Consumer Price Inflation (CPI) figures.
As shown, the ANZ-Roy Morgan Inflation Expectations (both weekly and monthly) have proved a reliable leading indicator as to the future direction of the ABS CPI estimates.
The latest back-to-back increases in the weekly ANZ-Roy Morgan Inflation Expectations figures will be on the mind of the RBA board as they deliberate in future over whether to increase interest rates again or not.
ANZ-Roy Morgan Weekly Inflation Expectations (January 2019 – June 2023)
Source: Roy Morgan Single Source (Australia), January 2019 – June 2023. Average weekly interviews, n=1,367.
Base: Australians 14+.
ANZ-Roy Morgan Inflation Expectations increased rapidly after bottoming at a record low of only 3.0% in October 2020. ANZ-Roy Morgan Inflation Expectations more than doubled within 18 months to 6.4% by late March 2022 – just after the Russian invasion of Ukraine in late February 2022.
The spike in the ANZ-Roy Morgan Inflation Expectations estimates led the quarterly ABS (CPI) results by a month which (when released in late April 2022) showed the March quarter 2022 CPI at 2.1% (the highest quarterly figure so far this cycle). The annual rate of ABS CPI for March quarter 2022 was 5.1%.
The Morrison Government’s late March 2022 decision to halve the fuel excise immediately reduced inflationary pressures and Inflation Expectations fell significantly to 5.1% by April 24, 2022. The ABS quarterly CPI figures for the June quarter 2022 subsequently fell to 1.8% (down 0.3% points).
These trends with ANZ-Roy Morgan Inflation Expectations leading the ABS CPI figures have continued into late 2022 and the first half of 2023.
ANZ-Roy Morgan Inflation Expectations peaked at 6.5% for the month of November 2022 – including a weekly peak early that month of 6.8% – and subsequently declined rapidly over the next two months. However, the decline in Inflation Expectations halted in January this year with the monthly measure at 5.3%.
Since then, Inflation Expectations have been relatively stable and averaged 5.3% through the first 10 weeks of the year from January until mid-March. After a brief dip at the end of April, Inflation Expectations in recent weeks look to have ‘re-accelerated’ and is up 0.4% points to 5.5% since mid-May – the first time Inflation Expectations have increased in consecutive weeks since mid-March 2023.
The back-to-back increases in ANZ-Roy Morgan Inflation Expectations came just before this week’s RBA meeting at which interest rates were increased for the 12th time in only 13 months. As part of its media statement the RBA rightly warned about the dangers of people’s expectations driving inflation higher:
“If high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment. Recent data indicate that the upside risks to the inflation outlook have increased and the Board has responded to this.”
Over the next few weeks all people interested in Australian economic conditions will be watching this measure closely to see whether inflationary pressures are building in the minds of Australians or not before the RBA meets again on the first Tuesday of July.
The next ANZ-Roy Morgan Inflation Expectations figure is due out next week on Wednesday June 14, 2023, following this weekend’s King’s Birthday Holiday.
For comments and information about Roy Morgan’s Inflation Expectations data, please contact:
Roy Morgan Enquiries
Office: +61 (3) 9224 5309
askroymorgan@roymorgan.com
Margin of Error
The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.
| Sample Size | Percentage Estimate |
| 40% – 60% | 25% or 75% | 10% or 90% | 5% or 95% | |
| 1,000 | ±3.0 | ±2.7 | ±1.9 | ±1.3 |
| 5,000 | ±1.4 | ±1.2 | ±0.8 | ±0.6 |
| 7,500 | ±1.1 | ±1.0 | ±0.7 | ±0.5 |
| 10,000 | ±1.0 | ±0.9 | ±0.6 | ±0.4 |
| 20,000 | ±0.7 | ±0.6 | ±0.4 | ±0.3 |
| 50,000 | ±0.4 | ±0.4 | ±0.3 | ±0.2 |
