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Australia Inflation Q1 2021

Australia: Inflation ticks up in Q1 2021

In the first quarter of 2021, consumer prices rose 0.6% over the previous quarter, following a 0.9% increase in Q4 2020. Q1’s increase was mainly the result of higher prices for transportation, health, clothing and footwear and communication.

Annual inflation came in at 1.1% in Q1, up from Q4 2020’s 0.9%. Therefore, inflation got closer to the Reserve Bank’s 2.0%–3.0% target band.

Commenting on the release, Robert Carnell, regional head of research at ING, stated:

“In 2Q21, the base comparison will be much starker, as Australia’s CPI index fell 1.9% QoQ in 2Q20, so even if 2Q21 is another uninspiring quarter for price increases, we should still see the headline rate of inflation increase by about a further 2 percentage points, potentially pushing annual inflation slightly above the central bank’s 2-3% inflation target. However, without a stronger pick up in the quarterly rates of CPI increase, this peak is likely to prove very short-lived. Third-quarter base comparisons reverse abruptly, with 3Q20 CPI increasing by 1.6%QoQ. So any spike in inflation above 3% in 2Q21 is unlikely to foster thoughts of any imminent changes to policy rates or quantitative easing schedules without a noticeable change in the underlying quarterly rates.”

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