No-flation
Rental prices increased by just 0.4 per cent over the year to September 2019, with nominal rental CPI effectively as low as we've ever seen over three consecutive quarters.
There was once again very little inflation in the third quarter, albeit the cost of having fun went up a bit.
There was a modest contribution from international holidays, and the 12.5 per cent federal excise on tobacco was the only other meaningful contributor.
Let's take a slightly zoomed in look at the underlying measures of inflation.
Overall, it was another deceleration to just 1.40 per cent.
Here are the analytical measures for the wonks:
Sign of the times
Core inflation has now been under the target band for fifteen consecutive quarters, and it's still getting further away rather than closer.
The weighted median reading for inflation this quarter was remarkably weak at just 0.33 per cent, and the trimmed mean wasn't much healthier at 0.38 per cent.
If the idea is, as reiterated by Governor Lowe in this week's Canberra speech, to average 2 to 3 per cent over the medium term then there is some serious catching up to do (we'd need a series of Bradman-like figures to get back to an average of 2½ per cent).
Arguably the overall result was roughly in line with the Reserve Bank's forecasts, which expect to see inflation meandering back to target some time in 2021, though few markets types around the traps actually seem to believe this.
Research by ANZ this week confirmed that the construction industry is now spitting out jobs quite quickly, and tomorrow's building approvals figures may well show the trend for approvals running at the lowest level in about 7 years.
It's a remarkable sign of the times that markets took the benign result to be forming a base of some sort, and have all but priced out a November rate cut.
Does anyone really think we're likely to see inflation back in the target band any time soon on these figures?
Or any meaningful progress towards full employment for that matter, as construction activity tumbles?
As Sophia Rodrigues of Central Bank Intel has pointed out, if the sin tax excise on tobacco isn't extended in 2020, there's even further downside risk for CPI ahead.
As Sophia Rodrigues of Central Bank Intel has pointed out, if the sin tax excise on tobacco isn't extended in 2020, there's even further downside risk for CPI ahead.
