July monthly Inflation Expectations were unchanged at 5.6% – but have now dropped to 5.2% in mid-August
In the month of July 2023 Australians expected inflation of 5.6% annually over the next two years, unchanged from June 2023. This also matches the Inflation Expectations of four months ago in March 2023 (also 5.6%) but is down 0.3% points from a year ago in July 2022 (5.9%).
Although Inflation Expectations have been stable over the last few months they have fallen during the early weeks of August. In further good news for those with a mortgage the RBA has now left interest rates unchanged for a second straight month.
The latest weekly Inflation Expectations are now at 5.2% in mid-August, down for two consecutive weeks since late July – the first consecutive weekly drops in the measure since late April.
The latest information on weekly Inflation Expectations is available to view each week in the Roy Morgan Weekly Update video on YouTube.
The softening in Inflation Expectations in recent weeks suggest the RBA’s decision to leave interest rates unchanged during their two meetings in July and August may be the correct decision, however there are still significant pressures in the economy. Just this week the average retail petrol price in Australia increased to $1.97 per litre – the highest it has been since November 2022 when Inflation Expectations reached a monthly peak of 6.5%.
The next monthly ABS CPI estimate is set to be released on Wednesday August 30, 2023. The latest ABS monthly CPI estimate for June 2023 was 5.4%, down slightly from 5.5% in the year to May 2023.
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 – July 2023).
Inflation Expectations were down in NSW and Victoria but jumped in Tasmania in July
A look at Inflation Expectations on a State-based level shows a mixed bag for July with Inflation Expectations down in the largest States of New South Wales, Victoria and Queensland, but increasing in the smaller States of Tasmania, South Australia and Western Australia.
Inflation Expectations eased slightly in New South Wales, down 0.1% points to 5.8%, Queensland, down 0.1% points to 5.7% and Victoria, down 0.2% points to 5.4% in July.
In contrast, Inflation Expectations surged in Tasmania, up 1.4% points to 6.5% - and are now easily the highest of any State in the country – and equal with the Northern Territory (also 6.5% in July).
There were also increases in South Australia, up 0.2% points to 5.6% and Western Australia, up 0.3% points to 5.3%. However, despite the increase, Inflation Expectations in Western Australia remain the lowest of any mainland State – where they have been for the last 10 months since October 2022.
Inflation Expectations in Country Areas increased to 6% (up 0.2% points from June) in July – the highest they’ve been so far this year. However, there was a slight decline in the Capital Cities, down 0.1% points to 5.4%. This is the largest gap between the two cohorts for six months since January 2023.
Roy Morgan CEO Michele Levine says Inflation Expectations remained elevated at 5.6% in July, and although they have dropped in early August to 5.2% - the falling Australian Dollar and rising petrol and energy prices, may prompt a renewed bout of inflationary pressures:
“The ANZ-Roy Morgan Inflation Expectations in Australia were unchanged in July at 5.6% – the highest back-to-back monthly readings so far this year. However, the recent weekly readings have shown the indicator dropping in early August – the latest weekly figure is at 5.2% – the lowest for three months since mid-May 2023.
“Although the drop in Inflation Expectations is good news, there are signs that it may prove to be short-lived. In recent days the Australian Dollar has fallen to under 65 US cents for the first time in two months and a further drop will take the Australian currency to its lowest since November 2022 – when the current ‘bout’ of inflation peaked.
“The early impact of the falling Australian Dollar is being felt at the pump with average retail petrol prices hitting $1.97 a litre this week – the highest they’ve been for nine months since mid-November 2022.
“Petrol prices are one of the most visible signs of inflation and if they continue rising in the days and weeks ahead and end up back over the $2 per litre mark (last reached over a year ago in July 2022) – this will increase the general inflationary pressures in the economy.
“If these inflationary pressures in the economy continue to grow there will be renewed pressure on the RBA to increase interest rates again despite pausing and leaving interest rates unchanged at their last two meetings in July and August.
“The next RBA meeting on interest rates is set for three weeks’ time and is current Governor Phil Lowe’s final meeting in the job. Although all the current signs are that the RBA is set to leave interest rates unchanged at next month’s meeting, if the Australian Dollar continues to and forces the prices of imports – such as petrol – to keep increasing, there may be one more interest rate rise to come for Governor Phil Lower before he’s replaced by Michele Bullock.”
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 August 2013 – July 2023 and includes interviews with 5,968 Australians aged 14+ in July 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
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 |
