Aussie bonds saw a miss in headline CPI...>

AUSTRALIA: Aussie bonds saw a miss in headline CPI figures yesterday, though

core measures (stripping out food and energy) were in-line with estimates.

- Ahead of the release there was talk about how price hikes for electricity and

gas would impact the Q3 print. The price hikes affect households and small

businesses and come into effect on July 1.

- ANZ estimate that the avg. household will see a 10% increase in electricity

bills, a 5% rise for gas. They say this will add to headline CPI in Q3'17 and

Q1'18 in particular. They note that "the effect on core inflation, however, is

likely to be limited, even when 2nd round effects are taken into consideration."

- They go on to say that "any rise in electricity bills is likely to be matched

by a reduction in discretionary spending, adding further pressure to

already-struggling retailers", but caveat this by noting that though private

consumption accounts for 60% of economic activity and price increases are a

headwind to consumer spending, the jump in electricity prices will not

significantly alter the economic outlook citing improved business conditions in

the face of the rises.