Prospects for more interest rates rises were possibly strengthened with the latest November CPI data from the ABS revealing continuing inflationary pressures.
The CPI data for the year to November was published by the Australian Bureau of Statistics
(ABS) last week and shows the October drop in inflation was short-lived. In November inflation rose again by 0.4% to bring the current rate back to the September figure of 7.3%.
These newest figures are in line with the outlook from the Reserve Bank of Australia
(RBA) for inflation to edge even higher. The Board’s outlook was upped from the previous 7.75% to a peak in 2022 of 8%. The newest data covers November so the December figures are awaited to see what the annual rate is and if it is a peak.
The December Quarter CPI data along with the monthly figures for December are due to be published by the ABS on 25th
January. The timing is proving a busy time to stay across developments for those intending to move on asset acquisitions in these months before end of financial year. The RBA Board meets on 7th
February for the first rate decision for 2023 and then in March there is the NSW State Election which could have impacts and opportunities for some business and then the Federal Budget in May.
But the focus for now is on inflation and what this latest uptick might mean in terms of interest rates for asset finance and commercial loans. There has been much discussion by analysts and others in the media around when and if the RBA might put the brakes on and halt the current run of rate rises.
This option was included in the Board’s discussions in December and according to remarks by Governor Lowe, all the options are being considered against the information and data that is available. But the Board also noted in December that further rate rises would be expected to be needed as it continues with its objective of achieving 2-3% inflation. So the ‘available data’, eg CPI figures and other data sets, are extremely significant for those considering applying for finance.
ABS Statement – November CPI Indicator
The ABS reported the CPI indicator, which is a measure of the rate of inflation, rose in the 12 month period to November 2022 to 7.3%. That is an increase on the October figures and movement which the ABS Head of Prices Statistics Ms Michelle Marquardt said indicates continuing inflation pressures.
The sectors identified as the main drivers of inflation continue to be housing which comprise new dwelling construction, the food and non-alcoholic category, the transport area, a category of household goods and services including furniture, and the cultural and recreation area. All of these categories posted an increase in the reporting period.
Ms Marquardt reported that it was the housing category group that contributor the most to the reported annual increase. The specifics being costs of labour and materials at high levels. But she notes that the rate that prices are growing in this area have eased from the 20.4% recorded in October to the current 17.9%.
The food area continues to record high prices and once again, operational expenses such as electricity and wages are seen as the main reasons. But the flood events also contributed through impacting supply levels.
Fuel prices continue to rise – 16.6% for the year to the reporting period compared with 11.8% for the October reporting period. Much of this a result of the end of the excise reprieve period.
Interest now turns to next week for an update on this data with the December CPI information.
Business Loan Interest Rates & Solutions
The remarks from the RBA combined with this latest data to analyse, may make for confusion and challenges in drawing conclusions as to how to proceed with major loan decisions. The one option that of course has not been mentioned at this stage is a cut to interest rates. It has been mentioned in the very long term projection discussions by analysts but not from the RBA. That leaves business owners with the option of seeking the cheapest interest rate options, especially for new asset acquisitions and striving to secure cheaper finance ahead of the possible next round of rate increases.
We can assist with cheaper rates across our loan products
sourced through a wide choice of lenders. In addition, operators may consider other commercial loan solutions, such as a Business Overdraft Facility
, to ease the pressure on the business from rising costs.
Contact Business Finance on 1300 000 033 to discuss cheaper interest rate asset finance.
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.