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Australia Inflation Q4 2019

Australia: Inflation inches up in Q4, but remains below the Central Bank’s target band

In the fourth quarter of 2019, consumer prices rose 0.7% over the previous quarter following a 0.5% increase in the second quarter, according to the Australian Bureau of Statistics (ABS). The figure beat market expectations of a 0.6% increase and marked the fastest rise since Q3 2016. According to the ABS, Q4’s acceleration was mainly the result of faster price rises for food and non-alcoholic beverages—likely due to the combined impact of drought and bushfires—and for alcohol and tobacco, as well as of a marked rebound in prices for transport on the back of higher oil prices. These were only partially offset by softer dips in prices clothing and footwear and health.

Inflation inched up to 1.8% in Q4 from Q3’s 1.7%, again beating market expectations of a 1.7% inflation. Therefore, inflation remained below the Reserve Bank’s 2.0%–3.0% target band. Regional variations persisted: Inflation came in between 1.6% and 2.1% everywhere excluding Hobart, where it logged 2.7%, and Darwin, where it was 0.5%.

Some pick-up in wage growth and growing signs of a recovery in house prices in the East coast will likely push inflation up going forward, and should also be fueled by the lagged effects of the three rate cuts delivered by the Reserve Bank in 2019.

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