Inflation modest bounce
Headline inflation was expected to rebound in the September quarter as the childcare subsidies rolled off and the sharp drop in fuel prices was not to be repeated.
The headline inflation rate did bounce for the third quarter, up by 1.6 per cent, but this came off the back of the historic 1.9 per cent plunge in the June quarter.
Over the year to September the trimmed mean measure increased by just 1.19 per cent, and the weighted median increased by just 1.27 per cent.
There was essentially no tradables inflation over the year to September 2020.
Overall there's still relatively little prospect of underlying inflation getting back to target over the next few years, meaning that the target will have been missed continuously for about 8 years...assuming we get back to target eventually,
Ongoing undershoot
Although it's not how the Reserve Bank would choose to measure its own performance, the Grattan Institute has previously highlighted how cumulatively inflation has shot significantly below the target since the end of 2015.
This impacts credibility and feeds into consumer and business expectations, and also means that we came into the recession with a stuttering economy rather than in a dynamic or flourishing environment.
That's all in the past now - the Reserve Bank is expected to set aside its long-standing focus on financial stability to ease its policy stance and announce further measures to support the economy next week.
More detailed analysis from data king James Foster here.
