High Au-NZ Correlations Imply Easing Q3 Australian CPI Plus Services

NZ’s Q3 CPI came in below RBNZ and consensus forecasts but remains elevated. It rose 1.8% q/q to be up 5.6% y/y down from 6% in Q2 driven by transport, council rates and rents. There is a very high correlation between NZ and Australian quarterly CPI annual inflation data, implying that there should be further moderation when the latter is published on October 2025. Bloomberg consensus is forecasting it to ease to 5.3% from 6%, which would bring it below NZ’s again.

Australia vs NZ CPI y/y%

Source: MNI - Market News/Refinitiv

• The correlation is also very high between Australia’s trimmed mean CPI and the RBNZ’s measure of core, which finally turned down in Q3 suggesting a further moderation in Australia’s. Consensus is projecting a drop to 5% from 5.9%, which would bring it below NZ’s 5.2%.
• Sticky services inflation remains a key concern for the RBA. NZ’s was lower than Australia’s in Q2, which looks like it was the peak as NZ’s eased 0.5pp to 5.6% in Q3. The 3-year rolling correlation has been around 80% for the last three quarters and so the move in NZ services may mean that Australia will see a moderation in Q3 too, which would likely reassure the RBA.
• Also domestically driven, NZ non-tradeables CPI inflation fell in Q3 to 6.3% but remains high. In Q2 it was 0.3pp below Australia’s rate.