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Australia Inflation Q4 2017

Australia: Inflation remains mild in Q4

In the fourth quarter of 2017, consumer prices rose 0.6% over the previous quarter, according to the Australian Bureau of Statistics (ABS). The figure came in below market expectations of a 0.7% increase and matched the previous quarter’s figure. According to the ABS, Q4’s reading was underpinned by higher prices for essentials including food and non-alcoholic beverages and transport, which were partially offset by lower prices for communication and consumer goods such as clothing, footwear and household items.

Inflation ticked up from 1.8% in Q3 to 1.9% in Q4, again slightly undershooting market expectations but moving towards the Reserve Bank’s 2.0%–3.0% target band. Annual average inflation edged up from 1.8% in Q3 to 2.0% in Q4. Substantial regional variations were present; inflation was above 2.0% along most of the East Coast, whereas softer readings in Darwin and Perth dragged on the overall figure. Continued mild inflation is likely being driven by tepid wage growth, and will give the RBA food for thought before it considers any potential rate hike.

In Q4, the ABS introduced new weights in order to calculate the consumer price index. Greater importance was assigned to housing expenditure, such as rent and utilities, with les importance assigned to food and non-alcoholic beverages, amongst other changes.

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