Inflation rebounds
After the huge +1.9 per cent plunge in Q2, headline inflation rose again in Q4 by +0.9 per cent.
Trimmed mean inflation came in at just +1.19 per cent for the year - the slowest year on record - and underlying inflation increased a little to finish the year at +1.27 per cent.
The 2-3 per cent inflation target has now been missed for five long years as policy has instead favoured leaning against the wind of asset prices.
Capital city rents fell modestly by -1.3 per cent in 2020, although mortgage repayments fell considerably more.
What little inflation there is was largely seen in non-tradables, especially tobacco (driven by another lift in excise), with childcare prices returning to pre-COVID levels towards the end of the year.
Tradables inflation was negative over the calendar year.
If inflation is supposed to average 2-3 per cent over the medium term, there's some significant catching up to be done.
And that's especially so if the Reserve Bank is to focus on actual (rather than projected) inflation outcomes, suggesting that talk of tapering is premature, at least until the damage to the labour market is repaired.
Detailed analysis, as always, here with James Foster.
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In other news, CoreLogic will report home values rising by about ½ per cent in January.
Source: CoreLogic
Likely to be leading the way will be Brisbane (+0.8 per cent) and Perth (+0.8 per cent), followed by Adelaide close behind.
Over the past quarter, prices have turned the corner in all capital cities, plus Gold Coast.
Source: CoreLogic
