Pete Wargent blogspot

PERSONAL/BUSINESS COACH | PROPERTY BUYER | ANALYST

'Must-read, must-follow, one of the best analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Sunday 21 April 2019

Lowe-flation (May cut live?)

Lowflation call

Jeepers...Westpac are among the very best of forecasters, and they're seeing consumer price headline inflation of just 0.1 per cent for the March quarter, with rents now flat.

Last week UBS called headline 'inflation' at 0.0 per cent.

Zip. Nada.

Australia has an inflation target of 2 to 3 per cent, but that's consistently been missing on the low side in recent years. 

The price of fuel is naturally volatile - perhaps it fell nearly 8 or 9 per cent over the quarter - but there will also be a material drag from household goods, such as furniture and appliances, clothing, and recreation.


Source: Westpac

If Westpac is close to being right then 'core' inflation could print at just 0.3 per cent.

And then there's not much compelling evidence to suggest that inflation is getting back to target.

Such a result would see annual core inflation decelerating to about 1.6 per cent from 1.8 per cent, and the two-quarter annualised pace holding flat at just 1½ per cent. 

If that proves to be the case, then the jungle drums will be beating a little louder for interest rates to be cut.

On balance, the result might just be an explicit easing bias in the May statement, which could keep the doves onside. 

Anyway, cheer up, it might never 'appen, as they say...let's see what plays out this week. 

Doff of the hat to Justin Smirk of Westpac with his always-excellent detailed analysis here