Softer-than-expected consumer price index data is an encouraging sign for the Reserve Bank of Australia’s ongoing battle against inflation, according to ANZ’s Senior Economist Adelaide Timbrell.
Data from the Australian Bureau of Statistics showed Australia’s CPI rate fell to a 17-month low in July, rising just 4.9 per cent. The news came just days ahead of the RBA’s September interest rate call.
Speaking on the 5 in 5 with ANZ podcast, Timbrell said the result - the first reading of the third quarter - suggested the RBA now faced less pressure around interest rates.
“Both the headline and trimmed mean inflation were down over the month, telling us despite electricity price increases, we’re not necessarily going to see July being a big problem factor for Q3,” she said.
“But even if we do see a reacceleration of inflation in Q3 after the very good Q2 data, that’s probably not going to be enough to spook the Reserve Bank [on rates]”.
That’s even more likely if rises are recorded in areas where inflation is expected, Timbrell said – wages, electricity prices, and “some of those housing-shortage related increases that the Reserve Bank knew about at their last couple of meetings”.
“If it wasn’t enough to hike then, it’s not going to be enough to hike now,” she said.
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Government support had helped curb the jump in July’s overall inflation number, Timbrell said.
“Electricity supply did jump in July as expected and without government rebate impacts, according to the Australian Bureau of Statistics, that increase would have been 19.2 per cent,” she said.
“But once we added in the impact of government rebates, the actual increase in electricity prices over July for this monthly CPI indicator was just 6 per cent.”
