Core Inflation Running Higher Than Other Countries

In the RBA’s December meeting minutes, it noted that underlying inflation is higher in Australia than in several other countries. Given the RBA mentioned this development, it is worth monitoring it, and there may be pressure for them to hike if the gap doesn’t narrow in upcoming data . November CPI prints on January 10 with December/Q4 on January 31, by this time most OECD countries will have released their December data.

• US core has been running below Australia since October 2022 and in October 2023 stood 1pp lower. US December data are released on January 11.
• Euro area underlying inflation has consistently printed below Australia’s and in October was 0.9pp lower. It peaked at 5.7% versus Australia’s 7.2%. Euro area preliminary December CPI is this week on January 5.
• One of the biggest differences is with Canada who recorded underlying inflation of 2.8% in October compared with Australia’s 5.1%. The Bank of Canada has hiked rates 475bp to 5% this cycle compared with the RBA’s 425bp to 4.35%.
• However, Australian core inflation remained below the UK in October at 5.1% versus 5.7% but in November the UK saw it ease substantially to 5.1%.
• NZ and Australia’s core inflation were inline in Q3. There is a high correlation between both countries for both headline and underlying CPI rates. Q4 NZ CPI is released on January 24.