Australia Inflation Q4 2020


Australia: Inflation ticks up in Q4

January 27, 2021

In the fourth quarter of 2020, consumer prices rose 0.9% over the previous quarter, following a 1.6% jump in Q3. Q4’s increase was mainly the result of soaring prices for alcohol and tobacco as well as for home furnishings, household equipment and services, which more than offset lower prices for clothing.

Annual inflation came in at 0.9% in Q4, up from Q3’s 0.7%. 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:

“Without much effort, inflation in Australia will head higher in 2021, with a massive 1.8%QoQ base-effect in 2Q21 likely to see headline inflation briefly touch 3.0% or higher. This won't last. Even with a relatively constructive run-rate for QoQ price gains, inflation should quickly settle down to a range between 2-2.5% for the rest of the year, below the Reserve Bank's (RBA's) target. We don't think the RBA will be in a hurry to reverse their very accommodative monetary stance, which we believe will be more of a question for 2022.”

Our panelists see inflation averaging 1.4% in 2021 and 1.6% in 2022%.

Author: Massimo Bassetti, Senior Economist

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