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Economic calendar in Asia Wednesday, January 8, 2025 – Australian inflation data | Forexlive

The item of interest today is the November monthly CPI reading from Australia. The quarterly CPI remains the gold standard for understanding inflation in Australia due to its comprehensiveness, stability, and historical consistency. Meanwhile, the monthly CPI provides valuable interim insights but is seen as a supplementary tool rather than a primary benchmark. the next quarterly reading is due on Wednesday 29 January at 11.30 am Sydney time (0030 GMT and 1930 US Eastern time on Tuesday the 28th). I’ve stuck in more information below, if you’d like it.

Taking a look at recent inflation data.

  • September Quarter 2024:

    • Quarterly Increase: The CPI rose by 0.2% in this quarter.
    • Annual Inflation: The CPI increased by 2.8% over the twelve months to September 2024, marking the first time since 2021 that annual inflation has fallen within the Reserve Bank of Australia’s (RBA) target range of 2–3%.

  • Trimmed Mean Inflation:

    • This measure of underlying inflation rose by 0.8% in the quarter, with the annual rate decreasing to 3.5% from 4.0% in the previous quarter, indicating persistent core inflation pressures.

Implications for Monetary Policy

  • Despite the headline inflation rate returning to the target range, the RBA is cautious due to the “sticky” nature of core inflation, which remains above the target.
  • As a result, the RBA has maintained the cash rate at 4.35%, emphasizing the need for sustained evidence of inflation aligning with the target before considering rate cuts.

  • Market Expectations:

    • Financial markets have adjusted their expectations, now anticipating potential rate cuts in early 2025, contingent upon continued favourable inflation data.

While the decline in headline inflation to within the RBA’s target range is a positive development, the persistence of elevated core inflation suggests that the RBA will likely maintain its current monetary policy stance until there is more consistent evidence of inflation sustainably aligning with its objectives.

  • This snapshot from the ForexLive economic data calendar, access it here.
  • The times in the left-most column are GMT.
  • The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

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Australian Monthly CPI Data

  • The monthly CPI indicator was introduced in October 2022 as a complementary measure to the long-established quarterly CPI.
  • It provides a more frequent snapshot of inflation trends in Australia by tracking price movements across selected goods and services categories each month.
  • However, the monthly CPI is considered an “experimental” series and has limitations:
    • It covers about 62–70% of the items in the quarterly CPI basket, meaning some categories are excluded, such as services with less frequent price changes (e.g., education and health).
    • It is subject to revisions, especially as more data becomes available or adjustments are made to seasonal factors.
    • Seasonal adjustment processes can create some volatility and reduce interpretability in the short term.

Why Quarterly CPI Data Is More Relevant

  1. Comprehensive Coverage:

    • The quarterly CPI encompasses the entire basket of goods and services. This comprehensive view ensures that categories with less frequent price changes are captured.
    • For example, items like school fees (updated annually) or insurance premiums might be omitted or underrepresented in the monthly data.

  2. Stability and Accuracy:

    • Quarterly data is less volatile because it aggregates price movements over three months, smoothing out short-term fluctuations.
    • It’s not subject to the same degree of revision as the experimental monthly indicator.

  3. Policy and Decision-Making:

    • The Reserve Bank of Australia (RBA) relies heavily on quarterly CPI data for its monetary policy decisions, such as setting interest rates, because of its stability and accuracy.
    • Quarterly data aligns with international practices, making it easier to compare Australia’s inflation trends with those of other countries.

  4. Economic Patterns:

    • Australia has a relatively small economy with distinct seasonal patterns in pricing, which the quarterly data captures more effectively. For instance, price changes in food, education, and holidays often align with specific times of the year.

How Monthly CPI Fits In

  • The monthly CPI is useful for tracking inflation trends in near real-time, especially in volatile economic conditions.
  • It complements the quarterly data by providing early signals of inflationary pressures, allowing policymakers and analysts to respond more quickly if needed.
  • However, it is generally viewed as a preliminary indicator rather than a standalone measure for policy or long-term analysis.