Australia’s CPI inflation came in stronger than expected in the September quarter, with headline inflation rising 1.2% over the quarter versus 1.1% expected and 5.4 per cent annually, according to the latest data from the Australian Bureau of Statistics (ABS).
As noted by Justin Fabo from Macquarie group, “trimmed mean inflation in Q3 was MUCH stronger than the RBA’s August forecast…about 0.4ppts stronger on a year-ended basis”:
And as he notes. “Measures of the BREADTH of quarterly inflation ticked higher and broadly supports the signal from the trimmed mean.
It is also broad based, with“43% of the CPI basket by number rose at an annualised rate of at least 5% in Q3”,
This is going to put more pressure on the RBA to hike rates, potentially on Melbourne Cub day. This is especially because Annual inflation remains elevated, for a range of services such as vets, restaurant meals and hairdressers.
Annual inflation continues to rise for some service categories including rents, dental services and insurance, while inflation for holiday travel has more than halved in the past two quarters. Again, inflation is broad based, you cannot just blame, oil prices for example.
Now, in a speech today RBA Governor Michelle Bullock said “Our focus remains on bringing inflation back to target within a reasonable timeframe, while keeping employment growing. It is possible that this can be done with the cash rate at its current level but there are risks that could see inflation return to target more slowly than currently forecast. The Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. At the same time, the Board is mindful that growth in demand and the rate of inflation have been moderating, and that there are long lags in the transmission of monetary policy. The Board will receive several pieces of information before its next meeting that will be important for this assessment. This includes a full update of the staff’s forecasts”.
We should also note that the CPI weights are typically updated each year in the December quarter to ensure the weights used in the CPI basket reflect current household spending patterns. But the ABS said that with the continued increase in Australians holidaying overseas, a partial update of the CPI weights has been implemented in the September 2023 quarter. This partial update increases the weight for international holiday travel, with the weight for the other components in the basket adjusted to offset the increase in travel weights. International holiday travel and accommodation was down 3.4%. Convenient, when travel costs dropped, whilst others rose. Just saying.
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