Australians forecast inflation of only 4% per year over the next two years in February, with forecasts down 0.2% over one month and 0.4% a year, according to Roy Morgan.
Inflation expectations have fallen below the range tracked for more than two years and are now at their lowest level since November 2016. The results have also fallen below the nine-year average of 4 , 9%.
Roy Morgan Chief Executive Officer Michele Levine said real estate prices in Sydney and Melbourne were among the drivers of the decline.
"The decline in inflation expectations is not surprising given that real estate prices have fallen dramatically over the past 12-18 months, as markets in the United States have been falling. Real estate in Sydney and Melbourne reached their peak in mid-2017, "said Levine.
The index of Roy Morgan revealed that Sydney and Melbourne showed the most pronounced drops in expectations. Sydney's inflation expectations are down 0.5% to 3.7%. At the same time, the cities of Melbourne fell 0.8% to 3.9% – the lowest in the Victorian capital since January 2017.
Inflation forecasts are the lowest in Perth, with only 3.5% – down 0.2% from 2018. This figure represents the lowest inflation forecast at Perth since July 2017.
Inflation forecasts were also down in other major markets such as Adelaide (-0.3% to 4%), Brisbane (-0.3% to 4.1%) and Tasmania (- 0.3% to 4.3%).
States also recorded declines. New South Wales' inflation has fallen to an all-time low since the index's inception nine years ago, at just 3.8%. Western Australia's expectations dropped to 3.7% – the lowest figure in any other state.
Victoria's inflation expectations fell below the national average at 3.9%, the lowest in the state since November 2016.
Inflation forecasts in the other three states are all above the national average, but fell in February. South Australia fell to 4.2%, Tasmania to 4.3% and Queensland to 4.4%
Queensland now holds the highest inflation expectations among states.
"The continuing decline in inflation expectations, as well as that of major real estate markets in Australia, Sydney and Melbourne, is increasingly prompting the federal government to introduce a significant federal budget. in two weeks to boost the economy as well as for the RBA to cut interest rates in the near future, "said Levine.
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