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Analysts at Westpac offer their afterthoughts on the Australian Q4 CPI beat, partly attributing the upbeat figures to the rise in the dwelling prices.

Key quotes

“The ABS reported a 0.9% lift in the December quarter CPI which was greater than Westpac’s (and the market median) forecast of 0.7%. At two decimal places, the CPI lifted 0.86% with the annual pace lifting a touch from 0.7%yr to 0.9%yr.”

“The core measures were around expectations with the trimmed mean lifting 0.4%qtr (WBC forecast 0.3%/market median 0.4%) while the weighted median gained 0.5%. Excluding the imputed series had little impact on the core measures.”

“The CPI is still being influenced by government taxes and subsidies which have been pushing and pulling on the data. However, outside of dwelling prices we found little to suggests more broad-based inflationary pressures.”

“The main surprise compared to our forecast was how the surge in housing demand lifting dwelling prices to swamp the benefit of the Home Builders Grants. In many capital cities developers were able to lift prices in excess of the value of the grants, even in Perth and Hobart were the Federal Grant ($25,000) was supplemented by state government grants ($20,000).“

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