Inflation remains well in check (the door is ajar…)

The ABS released its Consumer Price Index data for the March quarter today.

The figures revealed that headline inflation slowed all the way to just 1.3 per cent, after recording a benign 0.2 per cent rise in the quarter.

The big deflationary contribution came from fuel costs which declined by a massive 12.2 per cent in the quarter and a record 22.5 per cent over the year to March 2015.

All groups cpi

Underlying measures above expectations

On the preferred core measures, however, the weighted median (0.64 per cent) and trimmed mean (0.62 percent) prints led to an underlying inflation reading of 0.63 per cent for the quarter.

After amendments to previous quarters the preferred core measures show underlying inflation tracking at 2.3 per cent and 2.4 per cent respectively, comfortably within the target 2 to 3 per cent range.

CPI analytical series


Interestingly, non-tradables inflation, being the component of inflation driven by domestic pressures, increased by a sprightly 2.6 per cent.

The wrap

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Overall, it was another inflation release which could be interpreted either way.

Despite the soft headline result, the preferred measures of inflation are chugging along well within the target range.

Yet the result does seemingly allow scope for further easing of interest rates should this be deemed necessary by a forward-looking Reserve Bank.

Futures markets see a rate cut on May 5 as approximately an each-way bet as the Reserve Bank weighs up Australia’s declining terms of trade with slightly more promising employment data.

The “door is ajar”, one might say.

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Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

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