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Australia CPI preview: Headline inflation to rise 0.6% in Q4 – Westpac

The analysts at Westpac forecast Westpac a 0.6% rise in the Australian December quarter CPI lifting the annual pace to 1.8%yr from 1.7%yr.

Key Quotes:

“The December quarter is seasonally strong with the ABS projecting a seasonal factor of +0.1ppt. The seasonally adjusted CPI is forecast to rise 0.6%.

The trimmed mean is forecast to rise 0.4%qtr/1.5%yr and the weighted median is forecast to rise 0.5%qtr/1.3%yr. The six month annualized pace of the trimmed means is flat are 1.6%yr. 
The sources of inflationary pressure remain tightly contained.

Boosting the CPI in Q4 is an 8.5% rise in tobacco (worth 0.29ppt) and the 5.5% rise in auto fuel prices (worth 0.18ppt) which combined make a 0.47ppt contribution to the Q4 CPI. There is something of a drought impact in food prices (1.2%qtr/0.19ppt) but as yet no bushfire effect which, if present, could appear in Q1 2020.

Outside the above, prices are close to flat or falling. Housing costs rise just 0.2% (0.05ppt), recreation prices also rise 0.2% (0.03ppt), clothing & footwear (–1.5%) and household contents & services (–0.3%) have a seasonal fall while communication prices continue to the trend decline (–1.1%/–0.03ppt).

Core inflation at 1.5%yr (trimmed mean) remains well below the bottom of the RBA target band as moderating housing costs offset modest inflationary pressure elsewhere.”

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