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Australia: A subdued outlook for inflation - Westpac

The September quarter continued the run of softer inflation prints suggesting the competitive margin squeeze remains firmly in place for Australian economy, according to analysts at Westpac.

Key Quotes

“Dwelling costs lifted a bit and rising power bills are coming through, but rent inflation remains very modest. So even with inflationary expectations drifting back towards the long–run average (we suspect power bills are responsible for this) there was little in the September CPI to suggest that the Australian economy is about to break out of its low inflation trap.”

“The ABS maintains a program of periodic reviews of the Consumer Price Index (CPI) to ensure it continues to meet community needs. The ABS has released the details of the 17th series review, including updated expenditure weights.”

“What impact does the reweighting have? The history of the CPI is not revised. Instead, the new weights will be applied from the December quarter 2017, reducing our Q4 forecast by 0.1ppts to 0.4%qtr. More significantly, looking out to September 2018, the impact is –0.35ppts, taking the annual headline pace down to 2.0%.”

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