VIEW: Westpac Warns Childcare A Significant Unknown To CPI

Westpac is looking for a consensus 1.1% q/q and 5.3% y/y rise in Q3 headline inflation today but for the trimmed mean to be stronger at 1.1% q/q but for the annual rate to ease to 5% from 5.9% and the 6-month annualised pace to 4.0% from 4.3%.It is forecasting September CPI unchanged at 5.2%.

• Westpac observes that “while there is not a clear translation from the Monthly Indicator Trimmed Mean to the Quarterly CPI Trimmed Mean, the annual pace estimates are close enough for us to caution of possible upside risks to our September quarter Trimmed Mean estimate.”
• “Auto fuel is making the most significant contribution in the September quarter (+0.26ppt) closely followed by utilities (0.24ppt), food (0.17ppt), rents (0.13ppt), financial services (0.10ppt) and then dwelling purchases (0.09ppt).“
• The introduction of the childcare rebate means that there is significant uncertainty around the data. “In September we will find out just how large the offset from the increase in the child care rebate is. The Government increased the child care rebate from 71% to 91% and estimates that it represents a 37% reduction in out-of-pocket costs for eligible families.”