VIEW: Westpac Sees Downside Risks To Its Forecasts

Q2 CPI including the trimmed mean came in below expectations showing a significant moderation from the peak in Q4 2022. Westpac sees the moderation in Australia’s inflation as broader than expected and there may be downside risks to its inflation forecasts.

• Westpac is forecasting trimmed mean to end 2023 at 4.1% y/y.
• “Overall, we have to recognize that the overall momentum in the monthly CPI Indicator is softer than we had been expecting. This is something we are watching closely for if it continues, it would suggest downside risk to our current inflation forecasts.”
• Transport and especially fuel prices, household goods and services, and health were lower than expected.
• “It is also worth noting that utilities prices fell 1.1% in June, driven by electricity (–1.8%) plus gas and other household fuels (–1.2%). The ABS notes that electricity fell due to falls in some market offer plans.”