Australian inflation data for the March quarter 2017

Headline: 0.5% q/q MISS

  • expected +0.6%
  • prior was +0.5%

For the y/y, 2.1% MISS, but highest since September quarter of 2014

  • expected 2.2%
  • prior 1.5%


The'trimmed mean' (the measure the RBA pays most heed to, it is the 'core' inflation figure where the RBA target band is 2 - 3%)

0.5 % q/q IN LINE with expected

  • expected 0.5%
  • prior 0.5%, revised higher from 0.4%

1.9 % y/y BEAT on expected

  • expected 1.8%
  • prior 1.6%

The 'weighted median' CPI:

0.4 % q/q MISS on expected

  • expected 0.5%
  • prior was 0.4%

1.7% y/y MISS on expected

  • expected 1.8%
  • prior was 1.4%, revised lower from 1.5%

Non-tradeable inflation +2.6% y/y

Tradeables inflation +1.3%

Talk about a mixed bag ... headline miss and beats and misses on the two core measures.

The takeaway is that it is the core that the RBA watches and its under the bottom end of the target band. If the RBA wants to cut rates again then core consumer price increases won't stop them.

The RBA focus is on the labour market, though, not inflation. Job growth and wage growth is slow, which along with high indebtedness is weighing on consumption.

The other focus for the RBA is rapid house price growth, which they are addressing manily via enhanced macro-prudential measures (it remains to be seen how successful these might be) and are being helped a little by out of cycle mortgage rate hikes (small and limited though they are) by the banks.

If you put all those together the case for a rate cut from the Reserve Bank of Australia is not off the table. A net bearish report for the AUD today. (ps. There are plenty of more supportive inputs for the AUD, including very strong business conditions)

AUD has had a bit of a wobble lower by 15 or so points (as I update)