Australia: Q4 CPI printed 0.25% for June quarter - Westpac

Justin Smirk, Research Analyst at Westpac notes that the Australian Q4 CPI printed 0.25%qtr compared to Westpac’s forecast for 0.6% while the market median was 0.4%.

Key Quotes

“The annual rate is now 1.9%yr compare to 2.1% in Q1, 1.5yr in Q4, 1.3%yr in Q3 and 1.0%yr in Q2. The June quarter 2016 was the lowest rate of annual inflation since June 1999.”

“The core measures, which are seasonally adjusted and exclude extreme moves, rose as expected at 0.5%qtr. In the quarter, the trimmed mean gained 0.51% while the weighted median lifted 0.55%, highlighting just how modest the broader inflation picture is outside of housing or health. The annual pace of the average of the core measures is now 1.8%yr from 1.8% in Q1, and 1.5%yr in Q4 and Q3.”

“The six month annualised pace of core inflation came in 2.1%yr, a modest lift from the 2.0%yr pace in Q1. With revisions we now see the six month pace having been at, or just above, the bottom of the RBA’s target band for the last two quarters. Before that, the six month pace spent six quarter below the RBA’s target band.”

“The ABS analysis points to some seasonality in the June quarter CPI with the seasonally adjusted estimate rising 0.4% a two percentage point gain on the headline estimate of 0.2%.”

“For now our forecast see headline inflating peaking at 2.3%yr by the end of 2018. Given that the run of soft updates continues, we would suggest the risks lie to the downside to these forecasts.”