Fundamental Analysis

Australia September CPI

Australia September CPI

It was a broad based upside surprise in the core measures highlighting accelerating inflationary pressures. The CPI lifted 1.8% in the September quarter with the most significant contributions coming from new dwellings, gas and furniture.

Gas and furniture were upside surprises to us but the main difference between our 1.1% forecast and the 1.8% print was the +3.6% in electricity prices vs our forecast for -17% fall due to the state government rebates. Not only did we overestimate the impact of the rebates in Melbourne and Brisbane but we underestimate the 25% increase in Syndey power bills. The ABS estimates that excluding the effect of these schemes in WA, Queensland and ACT, electricity prices would have risen 15.6% in the quarter.

The 16.6% increase in electricity bill will have to appear in December quarter, and possibly into early 2023, as the use of these rebates fade. And this is before any further increase in power bills are applied.

This would not have a valid assumption as it was the broad based nature of the inflationary pressure as shown by Trimmed Mean distribution being significantly higher than normal. The lower trim started at +0.26% and the upper trim started at 3.71% with dwellings only just trimmed out at 3.72%.

Partially offsetting the September quarter rise was expected fall in automotive fuel, which fell in all three months of the quarter, reflecting falling crude oil prices. But the car prices rose just 0.1%, softer than our expected 2.1% rise.