Inflation Expectations increased to 5.9% this week – far higher than May average of 5.2%
In the last week Roy Morgan's weekly Inflation Expectations is up 0.4% to 5.9% - far higher than the May average of 5.2%. Australians expect inflation of 5.9% annually over the next two years.
The monthly Inflation Expectations figure for May of 5.2% was down 0.1% from April 2023 – and could be an indicator for tomorrow’s ABS May CPI figure. The monthly Inflation Expectations figure for May was the lowest monthly reading for Inflation Expectations for over a year since February 2022.
However, the latest figures show that the back-to-back decreases in monthly Inflation Expectations in April and May have not been sustained with weekly Inflation Expectations rising throughout June and now at 5.9%.
The second consecutive monthly decrease in Inflation Expectations in May came after the Albanese Government’s first Federal Budget and after the RBA resumed increasing interest rates in early May. The RBA has subsequently increased interest rates again in early June, up by a further +0.25% to 4.1%.
Looking longer-term, Inflation Expectations have averaged 5.4% so far during 2023 and are down from a monthly high of 6.5% in November 2022 and down significantly from a weekly high of 6.8% in early November.
The latest information on weekly Inflation Expectations is available to view each week in the Roy Morgan Weekly Update video on YouTube.
The fall in Inflation Expectations during 2023 has been followed by the ABS CPI figures which fell to 7.0% in the March Quarter 2023 down from a 30-year high of 7.8% in the December Quarter 2022. The latest ABS monthly CPI figure for April 2023 was 6.8% - indicating a further decline from the March quarter.
Inflation Expectations Index long-term trend – Expected Annual Inflation in next 2 years
Inflation Expectations dropped in New South Wales, Queensland and Tasmania in May
A look at Inflation Expectations on a State-based level shows Inflation Expectations declining in three States in May, however the trend was bucked in Victoria and Western Australia – which both increased.
Inflation Expectations were down in New South Wales (down 0.2% points), Queensland (down 0.5% points) and Tasmania (down 0.2% points) in May to 5.3%. In South Australia Inflation Expectations were unchanged at 5.2% in May.
There were increases in Victoria, up 0.3% points to 5.3% and were up in Western Australia by 0.1% points to 5.0%. The spread of Inflation Expectations across the six States in May at 0.3% was the smallest for nearly two years since July 2021 (0.2%).
Inflation Expectations in Country Areas were at 5.6% (down 0.1% points from April) in May and still far higher than in Capital Cities at 5.0% (down 0.1% points).
Roy Morgan CEO Michele Levine says Inflation Expectations fell in May by 0.1% points to 5.2% - however this fall has not been maintained and in recent weeks Inflation Expectations have increased and are now at 5.9% on a weekly basis in late June:
“Inflation Expectations in Australia fell slightly in May, but the rebound in the index throughout the month of June suggests analysts should be wary of a fall in this week’s ABS monthly inflation estimates for May – set to be released tomorrow on Wednesday June 28.
“The fall in Inflation Expectations was the second straight monthly fall in the index and coincided with a fall in the average retail price of petrol which fell by over 10 cents per litre during May to $1.78 per litre – the lowest petrol price so far this year.
“We have often seen during the last 18 months that the price of petrol has a significant impact on the Inflation Expectations of Australians and since bottoming at $1.74 per litre in mid-May petrol prices have again increased significantly – to an average of over $1.90 per litre in mid-June.
“Looking longer-term, Inflation Expectations have now averaged 5.4% so far during 2023, significantly above the RBA’s inflation target of ‘2-3% over the course of the cycle’, but also well below the peak of 6.8% in early November.
“These results suggest that although Inflation Expectations are lower than they were towards the end of 2022 – they have been sticky so far during 2023 between 5.0%-6.0%. In recent years we’ve seen Inflation Expectations play a key role as a leading indicator of the official ABS inflation numbers released weeks, or months, later.
“Interestingly, there is a key split that persists around Australia in terms of how different regions expect inflation will go over the next two years. Australians in Country Areas now expect inflation of 5.6% over the next two years compared to only 5.0% for those in the Capital Cities.
“These results show that inflation is not hitting all Australians equally and people living in Country Areas are consistently feeling the price increases in the economy to a greater degree than those in the larger Capital Cities. Inflation Expectations in Country Areas have now been higher than those in Capital Cities stretching back nearly three years to June 2020.
“The next ABS CPI monthly inflation figures for May are released tomorrow. If the trends we have seen in recent months continue we can expect to see a decline in the official monthly CPI results which will follow the monthly Inflation Expectations figures for May released today.”
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 5,000 Australians aged 14+ per month over the last decade from June 2013 – May 2023 and includes interviews with 5,943 Australians aged 14+ in May 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
The questions used to calculate the Monthly Roy Morgan Inflation Expectations Index.
1) Prices: “During the next 2 years, do you think that prices in general will go up, or go down, or stay where they are now?”
2a) If stay where they are now: “Do you mean that prices will go up at the same rate as now or that prices in general will not go up during the next 2 years?
2b) If go up or go down: “By about what per cent per year do you expect prices to (go up/ go down) on average during the next 2 years?”
3) “Would that be (x%) per year, or is that the total for prices over the next 2 years?”
The Roy Morgan Inflation Expectations Index is a forward-looking indicator unlike the Consumer Price Index (CPI) and is based on continuous (weekly) measurement, and monthly reporting. The Roy Morgan Inflation Expectations Index is current and relevant.
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Monthly Roy Morgan Inflation Expectations Index (2010 – 2023) |
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| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Yearly
Average |
| 2010 | n/a | n/a | n/a | 5.9 | 5.8 | 5.5 | 5.6 | 5.4 | 5.5 | 5.8 | 5.6 | 5.8 | 5.7 |
| 2011 | 6.6 | 6.4 | 6.4 | 6.2 | 6.1 | 6.2 | 6.1 | 5.8 | 5.7 | 5.8 | 5.5 | 5.5 | 6.0 |
| 2012 | 5.4 | 5.5 | 5.9 | 5.9 | 6.0 | 6.2 | 5.9 | 5.9 | 5.8 | 5.7 | 5.6 | 5.4 | 5.8 |
| 2013 | 5.2 | 5.1 | 5.3 | 4.9 | 5.2 | 4.9 | 5.3 | 5.0 | 4.8 | 4.9 | 4.8 | 5.0 | 5.0 |
| 2014 | 5.1 | 5.2 | 5.2 | 5.1 | 5.1 | 5.3 | 5.0 | 4.8 | 5.0 | 4.8 | 4.9 | 4.4 | 5.0 |
| 2015 | 4.4 | 4.3 | 4.5 | 4.5 | 4.2 | 4.4 | 4.4 | 4.5 | 4.5 | 4.2 | 4.4 | 4.5 | 4.5 |
| 2016 | 4.3 | 4.2 | 4.2 | 4.2 | 4.0 | 4.0 | 4.1 | 3.9 | 4.1 | 4.1 | 3.9 | 4.2 | 4.1 |
| 2017 | 4.5 | 4.4 | 4.4 | 4.4 | 4.3 | 4.2 | 4.3 | 4.5 | 4.4 | 4.5 | 4.5 | 4.5 | 4.4 |
| 2018 | 4.5 | 4.4 | 4.3 | 4.5 | 4.3 | 4.5 | 4.3 | 4.3 | 4.3 | 4.5 | 4.3 | 4.2 | 4.4 |
| 2019 | 4.2 | 4.0 | 4.0 | 3.7 | 4.1 | 3.8 | 4.1 | 3.9 | 4.0 | 4.1 | 3.9 | 4.0 | 4.0 |
| 2020 | 3.9 | 4.0 | 4.0 | 3.6 | 3.3 | 3.2 | 3.4 | 3.2 | 3.3 | 3.5 | 3.4 | 3.6 | 3.5 |
| 2021 | 3.6 | 3.7 | 3.8 | 3.7 | 3.7 | 4.0 | 4.1 | 4.3 | 4.5 | 4.8 | 4.9 | 4.8 | 4.2 |
| 2022 | 4.9 | 5.1 | 5.8 | 5.5 | 5.3 | 5.7 | 5.9 | 5.6 | 5.4 | 5.6 | 6.5 | 6.0 | 5.6 |
| 2023 | 5.3 | 5.3 | 5.6 | 5.3 | 5.2 | 5.3 | |||||||
| Monthly Average |
4.8 | 4.8 | 4.9 | 4.8 | 4.8 | 4.8 | 4.8 | 4.7 | 4.7 | 4.8 | 4.8 | 4.8 | 4.8 |
| Overall: Roy Morgan Inflation Expectations Average: 4.8 | |||||||||||||
The Roy Morgan Consumer Confidence Report – Including Inflation Expectations
To learn more about the trends for Inflation Expectations as well as Consumer Confidence for different segments and demographics throughout the Australian community, purchase the Roy Morgan Consumer Confidence Monthly Report.
About Roy Morgan
Roy Morgan is Australia’s largest independent Australian research company, with offices in each state, as well as in the U.S. and U.K. A full-service research organisation, Roy Morgan has over 80 years’ experience collecting objective, independent information on consumers.
RBA interest rates changes during the time-period measured: 2010-2023.
RBA – Interest rate increasing cycle (2010):
2010
April 2010: +0.25% to 4.25%; May 2010: +0.25% to 4.75%, November 2010: +0.25% to 5%.
RBA – Interest rate cutting cycle (2011-2013, 2015-2016 & 2019-2020):
2011 – 2013
November 2011: -0.25% to 4.5%; December 2011: -0.25% to 4.25%; May 2012: -0.5% to 3.75%;
June 2012: -0.25% to 3.5%; October 2012: -0.25% to 3.25%; December 2012: -0.25% to 3%;
May 2013: -0.25% to 2.75%; August 2013: -0.25% to 2.5%.
2014
There were no RBA interest rate changes during 2014.
2015 – 2016
February 2015: -0.25% to 2.25%; May 2015: -0.25% to 2%; May 2016: -0.25% to 1.75%;
August 2016: -0.25% to 1.5%.
2017 – 2018
There were no RBA interest rate changes during 2017-18.
2019 – 2020
June 2019: -0.25% to 1.25%; July 2019: -0.25% to 1%; October 2019: -0.25% to 0.75%;
March 4, 2020: -0.25% to 0.5%, March 20, 2020: -0.25% to 0.25% & November 6, 2020: -0.15% to 0.1%.
RBA – Interest rate increasing cycle (2022-23):
2022
May 2022: +0.25% to 0.35%, June 2022: +0.5% to 0.85%; July 2022: +0.5% to 1.35%;
August 2022: +0.5% to 1.85%; September 2022: +0.5% to 2.35%; October 2022: +0.25% to 2.6%; November 2022: +0.25% to 2.85% and December 2022: +0.25% to 3.1%.
2023
February 2023: +0.25% to 3.35%; March 2023: +0.25% to 3.6%; May 2023: +0.25% to 3.85%;
June 2023: +0.25% to 4.10%.
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 |
