Australia's CPI At Highest Since 2008

 

CREDIT: australiathegift.com.au

Australia's CPI has risen to a strikingly new high amid COVID outbreak.

The inflation has accelerated to 3.8% in the last three months, the highest it has been since 2008. 

If only taken into account are the impact of one-off factors such as free childcare, the key core measure only rose 1.6%.

James McIntyre from Bloomberg Economics has said, "With demand crunched by lockdowns and a slower recovery expected into 2022 on account of more modest fiscal support, there's little in the inflation reading or the outlook for prices and policy. We expect subdued wages growth to damp underlying inflation pressure."

Due to a move solely based on souring global risk sentiment, the yield on 10-year Australian government notes fell to 1.16%.

The Reserve Bank does expect inflation to vanish as price indexes lose all boosts due to last year's struggles with the pandemic. 

Australia looks like it could suffer from more price weakness amid the recent outbreak of COVID-19.

"The annual CPI movement as significantly influenced by COVID-19 related price changes from this time last year. Key drivers included the full unwinding of the Federal Government's free childcare package and a full return from the drop in fuel prices," said Michelle Marquardt, head of Prices Statistic at the bureau.

Other information to note:

- Automotive fuel, up 6.5% and medical and hospital services, up 2.4% due to annual increase in private health insurance premiums, were the most significant rises during the second quarter.

- Due to lower airfare prices, domestic holiday travel and accommodation dropped 1.3%. The reason behind the decline was increased competition and the government's tourism package.

As well as other central banks around the world, the RBA has stated that target inflation readings is just a temporary phenomenon and not an escalating problem.

Shane Oliver, chief economist at AMP Capital Investors Ltd has said, "With underlying inflation remaining subdued - the trimmed mean was only 0.1% above the RBA's forecast for the year to the June quarter - and the ever-extending NSW lockdown set to depress September quarter GDP and adding to uncertainty, the RBA is likely to be very dovish at it's meeting next week."