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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUSTRALIA
Given today’s NZ Q2 CPI data, Australia’s CPI due on July 26 is likely to show further moderation but with the quarterly increase still elevated around 1% and domestically-driven measures sticky (see MNI CPI Consistent With RBNZ Forecast, Domestic Measures Sticky). NZ’s inflation fell below Australia’s in Q4 2022 helped by more aggressive tightening. Correlations between the two neighbours remain high across CPI components and thus the key services measure may not moderate and probably not to the degree needed to reassure the RBA.
- NZ Q2 CPI rose 1.1% q/q and 6% y/y down from 6.7% in Q1 (which was 0.4pp below Australia’s Q1 y/y% CPI). The 3-year correlation is very high at 93% for the annual rates and 74% for the quarterly, implying that inflation should moderate in line with the RBA’s 6.4% Q2 forecast.
- Domestically-driven services and non-tradeables inflation also have high correlations at over 80%. The RBA is watching services in particular as it has a large wage component. NZ Q2 services prices were steady at 6.1% y/y and both countries were at 6.1% in Q1, implying that we may not see a moderation in Australian Q2 services inflation. NZ non-tradeables rose 6.6% y/y in Q2 down from 6.8% in Q1, which was 0.7pp lower than Australia’s Q1.
- Goods and tradeables inflation have very high correlations above 90% due to the impact of global prices. NZ Q2 goods inflation moderated to 6% y/y from 7% (0.6pp below Australia).
Australia vs NZ CPI y/y%
Source: MNI - Market News/Refinitiv
Australia-NZ services CPI y/y% correlations
Source: MNI - Market News/Refinitiv
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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