Roy Morgan has released its inflation expectations survey for May, with Australians expecting inflation of only 3.7% over the next two years – well below the RBA’s inflation target of 2% to 3% inflation annually:
However, Inflation Expectations are now tracking well above where they were a year ago (3.3%).
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Inflation Expectations are now 1% point below their long-term average of 4.7% but have increased by 0.5% points since reaching a record low of only 3.2% in August 2020.
As shown in the next chart, inflation expectations are much higher for renters than homeowners; although they have risen faster for home owners over the past year:
According to Roy Morgan CEO, Michele Levine:
“Renters have easily the highest Inflation Expectations at 4.2% in May, but this is up only 0.4% points since June 2020. The larger rises in Inflation Expectations have been for homeowners, up 0.7% points to 3.7% and for mortgagors paying off their home up 0.6% points to 3.4%.
“The Reserve Bank’s commitment to keeping interest rates at the record low of only 0.1% for the next three years until 2024 is clearly supporting the housing market, keeping market interest rates near record lows and anchoring the Inflation Expectations of mortgagors in particular.
“Those paying off their homes have now had lower Inflation Expectations than homeowners and renters for thirteen straight months since April 2020 when the RBA initially lowered interest rates in response to the outbreak of the pandemic”.