Goods deflation heads for Australia

The latest quarterly CPI inflation data from the Australian Bureau of Statistics (ABS) showed that goods inflation was falling fast, helping to bring down the overall inflation rate:

The good news is that more goods disinflation looks to be on the way to Australia, as illustrated by the next chart from Justin Fabo from Macquarie Group:

Clearly, the supply chain issues that drove up goods inflation over the pandemic have eased, bringing prices to heel.

This goods disinflation will obviously make it easier for the RBA to meet its 2%-3% inflation target and should temper the need for additional interest rate hikes.

It also backs up the RBA’s claim that Australia’s inflation is now “homegrown”.