Australia: Lack of price pressures – Westpac

Australia’s annual pace of the average of the core measures in Q2 was 1.8%yr, flat on the 1.8%yr in Q1, and up from 1.5%yr in Q4 and Q3, notes the analysis team at Westpac.

Key Quotes

“A significant observation was the lack of price pressure in major retail sectors, particularly clothing & footwear which typically sees a rise in Q2 but in this instance fell 0.3%.”

“Housing is crucial to core inflation. The 0.3% rise for this component had an interesting composition, with dwelling purchases gaining 0.9% due to out sized gains in Sydney and Brisbane, but rental inflation remaining subdued in aggregate as falling rents in Perth and Brisbane offset moderate growth in Sydney and Melbourne.”

“Our preliminary estimate for Q3 2017 is a 0.8%qtr rise in the headline CPI, 2.0%yr. Of the increase in the headline CPI, 0.4ppts comes from an 11% increase in utility bills. Food should also bounce with a strong seasonal rise in fresh fruit & vegetables. Our estimate for core inflation is soft at 0.3%qtr/1.8%yr.”