Aussies expect inflation to stay at 4.5%

In December, Australians said they expected inflation to be 4.5% each year for the next two years, according to a new survey conducted by Roy Morgan Research. This figure was unchanged for a second straight month, although it was up by 0.3% from a year ago.

Over the past year, the surge in inflation expectations was driven by rises in the resource intensive states of Queensland and Western Australia, due to the strong recovery of the mining industry.

Despite the increases last year, inflation expectations remain well below the seven-year average of 5.0%. 

The results were based on a survey of more than 4,000 Australians aged 14 years and older. 

Inflation expectations of L-NP and ALP supporters increases slightly 

An analysis of inflation expectations by federal voting intention shows that ALP supporters have inflation expectations just above the national average (4.6%). ALP sentiment was also higher than those of L-NP supporters (4.0%), although both increased in December.

In contrast, the inflation expectations of Greens supporters dropped in December to 4.2%. Their expectations are now a full percentage point lower than those who support Independents/Others (5.2%).

Inflation expectations highest in resource intensive states

An analysis of inflation expectations by state shows that the rise in expectations over the past year was driven by Queensland and Western Australia. 

Inflation expectations in Queensland were 5.0% in December 2017, following the narrow re-election victory of the Palaszczuk government in late November. Expectations have been up 1.1% over the past year since December 2016—the largest increase of any state.

Inflation expectations in WA increased by 4.0% in December 2017, up 0.6% over the past year. Expectations have been below the national average for most of the last two years, and the recovery of the mining industry finally appears to be returning the broader WA economy towards national averages.

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