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Repeats Story Initially Transmitted at 02:06 GMT Apr 24/22:06 EST Apr 23
--Underlying CPI Y/Y Rises Close to RBA Band; Accelerates Most in 9 Qtrs
By Sophia Rodrigues
SYDNEY (MNI) - Australia's consumer price index inflation rose less than
expected in the first quarter, marking the sixth consecutive quarter where the
outcome fell short of expectations, and shows there is yet no sign of inflation
pressures building in the economy.
The data confirms the Reserve Bank of Australia's worry of continued strong
competition in the retail sector being the main source of deflationary
pressures, and is a reason why the central bank expects progress in inflation
towards the mid-point of the target band to be gradual.
The data reduces possibility of a hike in the RBA cash rate this year but
still keeps intact the possibility of a hike early next year.
Headline CPI y/y met the MNI median forecast but marked the thirteenth
quarter in the last fourteen where the outcome has been below the RBA's 2% to 3%
Data published by the Australian Bureau of Statistics Tuesday showed
headline CPI rose 0.4% q/q, falling short of MNI median forecast for +0.5%.
Headline CPI y/y rose 1.9%, in line with the forecast.
The data was, however, in line with the RBA projection and is unlikely to
lead to any downward revision in the inflation forecasts next month in the
quarterly Statement on Monetary Policy. Any risk, therefore, may be slightly to
A bright spot in the data was the acceleration in underlying CPI -- roughly
taken as the average of trimmed mean and weighted median measures of inflation
-- to 1.95% y/y and very close to the RBA's target band. This is the biggest
rise in the last nine quarters where underlying CPI has remained below the RBA
In the latest quarter, the rise in inflation came from education and the
health group which was in line with expectation. Food and non-alcoholic
beverages rose 0.5% q/q and the housing group accelerated 0.7% q/q but was
mainly due to rise in utilities. This was partly offset by a 2.0% q/q fall in
clothing and footwear, a 0.4% q/q fall in furnishings, household equipment and
services, and a 0.7% fall in recreation and culture.
The fall in clothing and footwear group, and the furnishings and household
equipment group reflect the downward pressure in the retail sector. Inflation in
clothing and footwear has fallen in six of the last seven quarters, with the
2.0% q/q fall in Q1 the biggest decline during these quarters.
In case of furnishings and household equipment, the pace of inflation
decline slowed to -0.4% q/q in Q1 from -0.8%.
Inflation in the communication arena has declined for the last 15 quarters,
though the 0.4% q/q fall in Q1 marked a slower fall from -1.3% and -1.4% in the
two quarters prior.
Inflation excluding the housing group was up 0.6% q/q and +1.6% y/y.
Non-tradable inflation rose 3.1% y/y in Q1, the same as Q4 and marks the
third straight quarter of a rise above 3.0%. This is slightly positive and if
downward pressure from tradable inflation dissipates in coming quarters,
headline CPI could get within the RBA's target band and rise towards 2.5%.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: email@example.com