Quarterly inflation goes up in Australia but misses the RBA target of 2% to 3%

2019’s final quarter saw an increase in Australian inflation. Despite three rate cuts by the central bank last year, the core measures, however, remained under pressure suggesting that further stimulus is needed to improve the economy at large.

The Australian Bureau of Statistics announced the quarterly consumer price index (CPI) report on Wednesday highlighting a 0.7% increase in the recent quarter. The index was recorded at 0.5% in the previous quarter while the experts had forecasted a surge to 0.6% in the fourth quarter. Printing better than the previous reading and beating analysts’ estimate, the Australian dollar was seen gaining traction in the forex market after the release of the economic data.

Annual Pace Climbed To 1.8% In The Recent Quarter

The annual pace, as per the Statistics Bureau, climbed to 1.8%. The Reserve Bank of Australia currently has a target of around 2% to 3% for the annual rate. The report also highlighted a key core inflation’s measure further down at 1.6% that marked the target missed for the fourth year in a row.  

In light of the weakness, RBA had decided in favor of cutting rates in three of its policy meetings in 2019. Rates in Australia are currently at a record low of 1.75%. Considering the recent economic data, however, analysts are expecting one more round of easing before the economy can start to pick up. RBA next policy meeting (first meeting of the new year) is scheduled in the next week.

Analysts, however, are expecting the policymakers to keep rates unchanged on February 4^th. In April, however, chances of the next rate cut are currently at 70%. While home prices have recovered from the previous rate cuts, consumers are still weighed heavily amidst the record-high debt and poor wage growth.

Bushfire And Coronavirus Outbreak Blamed For Weaker Outlook

The outlook also turned weaker due to the raging bushfires in Australia and the recent outbreak of Coronavirus in China that is likely to affect tourism to Australia. In the upcoming months, prices are expected to surge further amidst the ongoing drought and the wildfire, economists commented.

NAB senior economist, Ivan Colhoun, estimated the quarterly economic growth to go down by 0.4% in the current quarter, attributed to the wildfire. The virus outbreak, on the other hand, can be expected to cost A$1-2 billion to Australia in lost revenue from tourism. The timing of the incidents, Colhoun added, was the worst as consumers were already in favor of avoiding splurge to maximize savings.