Aussie inflation eases, but sticky services inflation a problem

The Australian Bureau of Statistics (ABS) has released the June quarter consumer price index (CPI) as well as the June monthly inflation indicator.

As shown below, quarterly headline CPI rose by 0.8% over the quarter and by 6.0% year-on-year, while trimmed mean inflation rose by 0.9% over the quarter and by 5.9% year-on-year:

The results were better than anticipated, as illustrated in the below table:

The RBA forecast Q2 headline inflation of 6.3% YoY and trimmed mean of 6.0%, so this result should provide it with some comfort.

The monthly inflation indicator changes are shown below:

The problem for Australia is that while goods inflation is falling fast (as it is overseas), services inflation continues to rise:

Rents (+7.3% year-on-year) and energy (electricity +10.2% and gas and other household fuels +22.2%) are driving much of the surge in Australian services inflation.

The RBA should hold rates on this data. But tactically it would make sense for the outgoing governor (Phil Lowe) to hike and potentially overdo it before the new governor Michelle Bullock takes control in October.

Then Bullock can cut rates and be the hero.