Australian dollar crunched on lower than expected inflation

See the latest Australian dollar analysis here:

Macro Morning

The latest (sic) quarterly inflation report from the ABS has dented hopes of a higher Australian dollar following its release, with headline CPI at 0.6% for the quarter, much lower than the 0.9% expected with the yearly print also undershooting, at just above 1% instead of the 1.4% expectation.

The Aussie has fallen sharply back towards the 77 cent level versus USD after stalling overnight:

 

Australian dollar

Lower inflation print hammered the Aussie dollar.

The core inflation print that the RBA is watching closely also saw a much lower print, with the trimmed mean at only 0.3% over the quarter.

Local stocks are up over 0.5% on the release as this should keep the easing pedal down for a little longer, well until tonight’s Fed meeting at least.

The full CPI release is here at the ABS: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/mar-2021

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Comments

  1. “The fall in new dwelling prices was due to the impact of the Federal Government’s HomeBuilder grant, Without the offset from these grants, the price of new dwellings would have risen, reflecting increases in materials and labour prices in response to strong demand”
    So cost of building new home went up but inflation is down ? Doesn’t make sense, if cost of materials and labour went up it affects all construction not just homes, and also what about homes that were built without being entitled to the grants

    Also “were partially offset by falls in rents,” but we were just told that rents increased by a record amount last quarter

    • That’s a joke. You can’t say that if the grants were removed the dwelling prices would have been higher because of increased demand, when the increase in demand was because of the grants.

  2. Does the numberwang evaluate the CPI in a self-consistent manner? I mean, do they start with the “estimate” provided by the RBA and keep adjusting the weights until the output CPI equals the input? That could explain a lot.

    • kannigetMEMBER

      its simple, anything that has a direct and large impact on inflation is “mapped” out by normalising it or excluding large components….

      For example house prices are only an impact on inflation when the interest goes up as only the interest component is counted… So not only is the purchase price of the house not counted ( because who pays principal down ), but even if you dont sell it to someone else the interest component creeps towards zero over time as you pay your principal down.

      Inflation goes down so reduce the rates which pulls one of the largest components of inflation down….reducing inflation while the actual impact goes up….

      Apparently we removed the full housing calculation from the CPI model to bring it in line with international standards, I am starting to think its possible that this is one of the reasons that central banks have had such a poor time managing inflation…

      • The Traveling Wilbur

        It’s less of a lever and more of a button. And as any woman will tell you, continually pushing it won’t make it come any faster.

  3. This is pretty bad especially when the US can easily get into the 3’s.
    Perhaps the RBA needs to go negative and double down on those bond purchases.
    Or perhaps they can just bypass all that and go shopping themselves because its pretty hard for the average person to try and furnish their new derelict, shoe box place with the $1.2m mortgage they needed to get it.

    • The Traveling Wilbur

      The First Home Owner’s Harvey Norman Furniture Grant is only a matter of a year or two away.

  4. DingwallMEMBER

    It is not called numberwang for nothing. Prices for everything have gone crazy yet our “inflation” basket is just a basket case.

  5. Low inflation BS, what a joke, Inflation is rampant thanks to the 300 billion increase in the money supply, printed out of thin air. Surely I am not the only hearing stories of Caravans being sold for many thousands more than the owners paid years before, check housing prices Kaboooooom, I have a mate who paid 112k for a V8 Diesel Sahara 18 months ago, now its worth north of 150k. No inflation my hairy A???
    I guess if you don’t measure it, it wont impact CPI, Lucky Banana prices haven’t gone up

    • SoCalSurfCreeperMEMBER

      Bananas are in the volatile ‘food and energy’ basket, so they are presumably excluded. The ‘vehicle’ basket now made up of Chinese knockoffs. Rand Rovers, Randcrusiers and Tesras. No inflation there.