Data Snapshot: Consumer Price Index - Still Below Target

The key points in this report are:


  • Headline CPI rose 0.6% in the quarter, versus consensus expectations for a 0.5% increase. It was the strongest quarterly lift in headline CPI in 1½ years. The annual rate lifted from 1.3% in the March quarter to 1.6% in the June quarter.
  • Underlying CPI (trimmed mean) rose 0.4% in the June quarter. This outcome left the annual rate steady at 1.6%, but this was stronger than consensus expectations of 1.5%.
  • While inflation was a touch stronger than expectations, inflation outcomes were still weak. Both headline and underlying inflation are running below the RBA’s 2 to 3 percent per annum target band. Moreover, underlying inflation has been below the RBA’s 2 to 3 percent target band for 3½ years, and is still unlikely to return to the RBA’s target any time soon.
  • The stronger-than-expected result mostly reflected higher oil prices – automotive fuel rose 10.2% in the June quarter.
  • There was also some pass-through of higher prices from the weaker Australian dollar, reflecting higher prices for clothing & footwear, furniture, international travel and tradables inflation. 
  • Nonetheless, domestic price pressures remain very subdued reflecting weakness in the housing market and ongoing spare capacity in the labour market.
  • The outlook for inflation remaining subdued for some time remains unchanged. Today’s data also doesn't change the fact that there continue to be downside risks to the economic outlook and the unemployment rate is at risk of rising. The RBA wants to see further signs of progress towards its inflation and full-employment objectives and has indicated a willingness to provide further monetary easing “if necessary”.


Please see the attached report for more information.



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