In the early 1990s, entrenched inflation was broken by the “recession we had to have”, as it became known. Since then, “core” consumer price inflation has averaged around 2.6% which, coincidentally, is almost the midpoint of the RBA’s target range of 2%-3%. However, it has trended lower and lower since 2009 and it has not been above 2.0% since late 2015. With little sign of inflationary pressures, the RBA has decided it can loosen monetary policy even further and, as a consequence, economists are generally forecasting further official rate cuts.
Figures for the June quarter have now been released by the ABS and both the headline and seasonally-adjusted figures were ahead of their expected 0.5% increases. The headline inflation rate was +0.6% for the quarter while the seasonally-adjusted inflation rate accelerated to +0.7%. On a 12-month basis, both headline and seasonally-adjusted inflation registered 1.6% and 1.4% respectively, both having recorded 1.3% growth rates in the March quarter.
Core inflation measures favoured by the RBA, such as the average of the “trimmed mean” and the “weighted median”, increased on a quarterly basis but slowed on an annual basis. The average of the two measures, 0.4%, was in line with the market’s expected figures for the quarter and more than the March quarter’s 0.2%. However, the 12-month figure of 1.4% was a notch down from March’s revised figure of 1.5%.
UBS economist George Tharenou said the key driver for the quarter’s increase was automotive fuel. He noted CPI excluding fuel and tobacco only rose by 0.3% for the quarter and by 1.3% for the year.