In June, Australians expected inflation of 3.2 per cent annually over the next two years. This result signified a new record low for the index – down 0.1 per cent on May and a significant 0.8 percentage points on the pre-COVID period of February 2020.

Inflation expectations have declined around the nation; however, the magnitude of the drop has been far larger in some places than others – notably Melbourne where inflation expectations have dropped 0.9 per cent points since February to only 2.8 per cent in June.

The biggest decline has been in Tasmania, down from 4.9 per cent in February to 2.9 per cent in June, a drop of 2 per cent points as Hobart’s formerly hot housing market has cooled during the COVID-19 pandemic.

Roy Morgan CEO Michele Levine said the rapid decline in inflation expectations in recent months is a sign of ongoing economic weakness as Australia experiences its first recession for three decades.

The sharpest declines have been in Melbourne and Tasmania, she explained, noting that the Victorian capital has experienced a spike in new cases of COVID-19 since mid-June, and in response, restrictions have been tightened progressively, with the Melbourne metropolitan area returning to a stage 3 lockdown this week. 

The renewed restrictions will place a great deal of pressure on businesses that have already endured more than three months of turnover well below normal levels.

“The surge in new cases in Melbourne has also led to the Tasmanian government extending its state of emergency until the end of August – Tasmania’s economic dependence on Victorian businesses and tourists is larger than for any of the other mainland states,” Ms Levine said.

“The island border remains closed to visitors until at least late July.”

States that are surviving the COVID-19 pandemic are seeing stronger inflation expectations, the research also showed.

Adelaide experienced the least change, with inflation expectations of 3.7 per cent in June down only 0.1 per cent percentage points since February, while expectations in Brisbane, Sydney and Perth are down by 0.5-0.6 per cent

“Although most parts of Australia appear to have flattened the curve and suppressed COVID-19 to almost negligible levels, the renewed outbreak in Victoria also provides a stark warning to other jurisdictions about remaining vigilant,” Ms Levine said.

“The situation in Victoria clearly illustrates that the consequences of another nationwide outbreak would be devastating to businesses and the fragile economic recovery already underway. All efforts must be undertaken to prevent this from happening.”

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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