Today’s ABS release of CPI data this morning shows Consumer Price Inflation (CPI) rose 0.7% in the second quarter of 2015 (after a 0.2% increase in the first quarter) for an annual change of 1.5% (up from 1.3% in the previous quarter). While this remains well below the RBA’s target range of 2-3% we need to be mindful that the “core” inflation measures (which strip out volatile movements and is the measure the RBA actually watches) rose 0.55% q/q for an annual increase of 2.3% (down from a marginally upwardly revised 2.4% last quarter). Inflation is not an issue, and will not be a impediment to the Bank cutting rates again if they need to. However, neither is core inflation so low that a rate cut is any more likely after this release.
Also interesting to note is that the recent slide in the value of the A$ is starting to see real impacts in terms of import prices rises. In this second quarter we saw tradable prices rose 1.2% q/q for an annual decline of 0.3% (in comparison in the first quarter the figures were -1.2% q/q and -0.9% y/y).
NOTE: I am currently attending the Developing Northern Australia 2015 Conference in Townsville and have had time to chat to a Manager from the ABS who is responsible for Regional Data. One of the topics I discussed with her was the unavailability of pricing data for regions outside of the Capital Cities (CPI data relates ONLY to the Capital Cities). Despite the QLD Government providing some work on the variations of pricing indexes for the regions in 2013, there remains no reliable data-set which allows us to meaningfully determine the real inflationary pressures outside of Brisbane. She assured me that this issue (along with many others!) is on the ABS’s radar in terms of improving regional data.