Breaking News
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. Upgrade now
0
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. More details

Australia’s Inflation Exceeds Estimates as Recovery Builds

Economic IndicatorsJan 27, 2021 03:09
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

(Bloomberg) -- Australia’s consumer prices rose faster than forecast in the final three months of last year as the government amended funding to various stimulus programs amid an economy regaining momentum.

The consumer price index advanced 0.9% from the third quarter, underpinned by increases in tobacco excise, compared with economists’ estimates of a 0.7% gain, data from the Australian Bureau of Statistics showed Wednesday. Annual CPI also beat forecasts, similarly rising by 0.9% versus an estimated 0.7%.

“Since the June quarter fall of 0.3%, the increase in annual inflation largely reflects the unwinding of free child care and higher petrol prices,” said Michelle Marquardt, head of Prices Statistics at the ABS. “The rise in demand for new dwellings is reflected in higher building approvals for houses and a record value for housing loan commitments.”

Australian prices have been hit by cross-currents caused by fallout from Covid-19 and governments ending some support programs in favor of stimulus for areas like housing. The Reserve Bank of Australia has adjusted its inflation framework to allow the economy to run a little hotter. It doesn’t intend to tighten borrowing costs until inflation is sustainably within the 2-3% target.

Achieving that will require strong wage growth stemming from a tighter labor market, outcomes unlikely to be in the offing any time soon with the jobless rate at 6.6%.

Today’s report showed the quarterly trimmed-mean gauge of inflation matched estimates, rising 0.4%, and slightly exceeded them on an annual basis, advancing 1.2% versus a forecast 1.1%

The weighted-median gauge, another core measure, advanced 0.5% from the third quarter for an annual increase of 1.4%, compared with forecast increases of 0.4% and 1.2%, respectively.

What Bloomberg Economics Says...

“There is little sign of emerging inflation pressure, with such tension only witnessed in higher purchase costs for new dwellings and motor vehicles, and a stabilization in rents..”

-- James McIntyre, economist

For the full note, click here

Separate data released at the same time as inflation, showed business conditions -- measuring hiring, sales and profits -- surged in December to the highest level since 2018. The employment index surged, reflecting Australia’s strengthening labor market that has seen unemployment fall to 6.6% in December from a high of 7.5% in July. The economy entered the pandemic with a jobless rate of 5.1% in February 2020.

“The rise in the employment index is very encouraging,” said Alan Oster, chief economist at National Australia Bank (OTC:NABZY) Ltd. that runs the monthly business sentiment survey. “The gains have been seen across all states and notably, Victoria appears to have caught up with New South Wales and Queensland -- great news for the state that has suffered an extended lockdown.”

Yet, business confidence slid in the period amid a flareup in Covid outbreaks in Sydney and elsewhere.

More Detail

Today’s inflation report showed tradables prices, which are typically impacted by the currency and global factors, fell 0.4% in the fourth quarter from the previous three months. Non-tradables, which are largely affected by domestic variables like utilities and rents, advanced 1.5% due to the scheduled hike in the tobacco excise.

Other details in the report include:

  • There was a rise of 6.3% in domestic holiday travel and accommodation following the re-opening of state and territory borders and the peak summer holiday period. International holiday travel and accommodation was again imputed
  • The most significant price fall was in electricity, down 7.5% after Western Australia provided a one-time credit to households

The Reserve Bank of Australia meets for the first time this year on Tuesday and is expected to keep its cash rate and yield target to 0.10%. It is also set to maintain its A$100 billion ($77.4 billion) quantitative easing program.

(Updates with Bloomberg Economics’s view in eighth paragraph.)

©2021 Bloomberg L.P.

Australia’s Inflation Exceeds Estimates as Recovery Builds
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email