The Melbourne Institute’s Inflation Gauge is an attempt to replicate the ABS consumer price index (CPI) on a monthly basis. It has turned out to be a reliable leading indicator of the CPI, although there are periods in which the Inflation Gauge and the CPI have diverged for as long as twelve months. On average, the Inflation Gauge’s annual rate tends to overestimate changes in CPI inflation by an average of about 0.10% in any given quarter.
The Inflation Gauge increased by 0.40% during March after a 0.10% increase in February and a 0.10% fall in January. On an annual basis, the index increased by 2.10%, up from February’s comparable rate of 1.70%.
Given the Inflation Gauge’s tendency to overestimate, the latest figures imply an official CPI reading of 0.6% (seasonally adjusted) for the March quarter and 2.0% in annual terms.