Inflation preview
By far the most anticipated data release this month will be the quarterly inflation figures for June, which are due to be released on Wednesday.
Australia's monthly inflation indicator has already eased back to 5.6 per cent over the year to May, having run as high as 8.4 per cent in December 2022.
The quarterly figures won't be as low as that, but they'll probably come in at around 6.3 per cent over the year to June, down from 7 per cent in March, and 7.8 per cent in December 2022.
So the direction of travel is pretty clear now.
Looking elsewhere around the developed world, the US inflation rate was just a nick under 3 per cent over the year to June, and in Canada the headline inflation figures had already fallen to 2.8 per cent.
Who knows, before long they may well be talking about deflation being a bigger risk!
The UK is a bit of an outlier, having experienced all kinds of bother related to trade friction (Brexit), exploding food prices (Ukraine war), energy bills (ditto), rampant immigration, and more.
But even the Brits have seen inflation drop from 11.1 per cent in October 2022 to 7.9 per cent in June, with the latest figures surprising to the downside.
Core quarterly or 'trimmed mean' inflation is set to continue its downtrend from 1.9 per cent in September 2022, to 1.7 per cent in December, 1.2 per cent in March...to around 1 per cent this quarter.
This will be good to see, and I don't know anyone who genuinely believes that the economy is at risk of pumping out too much more heat and inflation from here given the increasingly parlous state of retail sector.
The June retail figures are expected to be flat at best, even with the very high rate of population growth.
Policy and looking ahead
Still, with headline inflation likely to be around 1 per cent over the June 2023 quarter, there will be some debate about whether interest rates should be increased again to bring inflation down faster than it's already dropping.
Of course, given that so many fixed rate mortgages have yet to reset, this would add further to the risks of slowing the economy into recession.
Another key point is that while interest rates are one tool for bringing down inflation, the astonishing turnaround in the Federal Budget due to full employment means that there's a tidy surplus on the way, and the inflation rate may also be further reduced by the Treasurer mechanically through cost of living relief.
Labor's first Budget was sensible and solid enough, but it did attract some modest criticism for being a tad heavy on expenditure (which may have risked heightening inflation pressures in sectors such as construction).
Should be an interesting week...
