Veggie price decline influences inflation outcome: Pete Wargent
Pete WargentDecember 17, 2020
A surprisingly soft inflation result, and one which puts further interest rate cuts right back in the frame, if indeed they ever snuck out of shot.
Headline CPI printed at 0.5% for the June quarter for an annual result of just 1.5%, well beneath the target range of inflation, thereby locking in the weakest run of inflation results we have seen in years.
Indeed the index numbers show that the headline result was weaker still, and only rounding took the headline figure up to 0.5% for the September quarter.
Indeed the index numbers show that the headline result was weaker still, and only rounding took the headline figure up to 0.5% for the September quarter.
The soft result was influenced by the declining price of vegetables (!), telco quipment & services, and perhaps more predictably, automotive fuel.
Non tradables or domestic inflation came in at a soft 0.4% for the quarter and 2.6% for the year, suggesting that domestic price pressures are fairly subdued, while tradables inflation remained very soft.
Despite the Aussie dollar having tanked all the way from above parity against the US dollar to around 71.3 cents after this release, there still seems to be little evidence of inflationary pressure.
This is generally viewed as a sign of weakness for the economy, with wages growth sundued and sentiment too weak to see the higher prices of imports to be passed on to consumers.
Most significantly of all the underlying measures of inflation - the trimmed mean and weighted median - both came in at just 0.3% for the quarter, for annual prints of 2.1 and 2.2% respectively.
This is generally viewed as a sign of weakness for the economy, with wages growth sundued and sentiment too weak to see the higher prices of imports to be passed on to consumers.
Most significantly of all the underlying measures of inflation - the trimmed mean and weighted median - both came in at just 0.3% for the quarter, for annual prints of 2.1 and 2.2% respectively.
These figures will be seen to add to the case for further interest rate cuts with inflation sinking towards the bottom end of the target range and unemployment remaining above 6%.
Futures markets are undecided about an interest rate cut on Melbourne Cup Day next week (62% chance), but hav priced in a high probability of the cash rate being dropped once again before the Christmas break.
PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.
His latest book is Four Green Houses and a Red Hotel.
Pete Wargent
Pete Wargent is the co-founder of BuyersBuyers.com.au, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.