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Inflation drops sharply

The ABS released its monthly inflation gauge, and it showed inflation dropping sharply from 7.4 per cent to 6.8 per cent in February.

This was way under market estimates and confirms inflation as well down from 8.4 per cent last year.

After an implied -0.4 per cent last month, the monthly inflation figure was only about 0.2 per cent.

All Groups Monthly Cpi Indicator

Source: ABS

Much of the drop was driven by a -15 per cent decline in travel prices.

Of course, this was one of the major drivers of inflation in the first place due to Australia's extremely extended lockdowns and the massive disruption to aviation.

If you strip travel out of the figures, annual inflation was actually slower again at 6.6 per cent.

As for the wages 'spiral', well, that didn't happen either...and immigration is now set to record highs, so you can forget about further increases in the rate of wage inflation.

Australia Wages Growth Quarterly

The RBA is set to pause interest rates in April now.

And of course with 1- and 3-year bond yields far below the current cash rate target, the 300 basis points lending assessment buffer should be canned as well to help ease the chronic dwelling supply shortage.

About Pete is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. Using a long term approach to building businesses, investing in equities, & owning a portfolio he achieved financial independence at the age of 33. Visit his blog
2 comments

The lending asessment buffer topic is an interesting one. With effective interest rates around 6%, we would be stress tested around 9% which is ridiculous, if the projection for the medium term was lower rates. For investors like myself, looking to r ...Read full version

1 reply

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