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Inflation drop welcome as economy starts to cool

  • Written by Simon Docherty the Chief Customer Officer of budgeting app Frollo

The recent drop in inflation is a positive development for Australian consumers, who have been struggling with the increasing cost of living over the past year. The Reserve Bank of Australia's (RBA) monetary policy measures appear to be having an effect, and this is welcome news. However, it is crucial that policymakers take steps to minimise the impact of an economic slowdown for everyday Australians.

Data from our budgeting app Frollo indicates that consumers have been allocating a growing portion of their income to essential expenses such as groceries, healthcare, and insurance. Many have also turned to unregulated credit sources such as Buy Now Pay Later (BNPL) providers, with the average BNPL user spending over $400 per month on repayments. With consumers struggling to make ends meet, it was only a matter of time before they began to reduce their spending and tighten their budgets.

The recent drop in inflation will provide some relief to Australian consumers. Inflation is a key indicator of the health of the economy, and a drop in inflation suggests that the RBA's monetary policy measures, such as increasing interest rates, are having an impact.

However, policymakers must balance the need to slow down the economy with the potential impact on consumers and small businesses. A sharp economic slowdown could lead to job losses, reduced consumer spending, and a decline in business activity. This could have a severe knock-on effect on the economy, and it is essential to ensure that everyday Australians are not adversely affected.

Ultimately, the goal should be to create an economy that is both strong and equitable, where everyone has the opportunity to prosper.

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