Australia: Inflation takes centre stage – Westpac

Elliot Clarke, Research Analyst at Westpac, suggests that in Australia inflation was a key focus this week and the June quarter CPI kept to a familiar theme as the headline series disappointed the market’s expectation for a seventh consecutive quarter.

Key Quotes

“Headline and core inflation were both benign in the quarter at 0.4% and 0.5% respectively, with the weaker result for headline inflation coming as a result of June being a seasonally weak quarter (the core measures are seasonally adjusted and so abstract from this volatility).”

“The annual rates also remain wedded to the bottom of the target band, at 2.1%yr and 1.9%yr respectively for headline and core inflation. As it stands, the balance of risks imply that inflation is likely to hold around this pace through the remainder of 2018 and 2019.”

“Key non-tradeable prices, particularly for housing, health and education, are restraining inflation, while energy prices have become an outright deflationary force.”

“Outside of these factors however, there is no real evidence of a broadening in price disinflation/ deflation. As a result, inflation will not act as a catalyst to change the stance of policy.”