Australia: Headline CPI likely to post 0.5% for Q1 2018 - Westpac

Justin Smirk, Research Analyst at Westpac, suggests that Westpac’s forecast for the headline CPI is 0.5%qtr holding the annual pace flat at 1.9%yr for Australian economy.

Key Quotes

“In the March quarter the increasing perseverance of post-Christmas sales now overwhelms an historical seasonal uplift associated with the re-pricing of administrated prices and the resetting of the Proscribed Benefits Scheme. The ABS estimates a seasonal factor of slightly more than –0.1ppt.”

“Core inflation is also forecast to print 0.5%qtr (0.50% at two decimal places) holding the annual pace flat at 1.9%yr. The trimmed mean is forecast to rise 0.54% while the weighted median forecast is 0.47%. The two quarter annualised pace is forecast to lift modestly to 1.8%yr from 1.6%yr – still under the bottom of the RBA’s target band. 
Key factors in Q4 are: annual repricing of health and education being offset by the significant discounts associated with the Boxing Day/New Year sales.”

“Westpac’s forecast will take the two quarter annualised pace headline inflation to 2.2%yr from 2.5%yr in Q4.”

“Core inflation remains below the bottom of the RBA target band and with the expected moderation in dwelling purchases price inflation through 2018, along with consumer goods still captive to a competitive deflationary cycle, it is hard to see core inflation breaking much higher.”