Goldman’s excellent Andrew Boak is still on point.
Australia’s recent CPI data showed that core inflation is now tracking well within the RBA’s 2-3% target band, with six-month annualised growth in the trimmed-mean measure decelerating 25bps to 2.5%.
Compositionally, a range of wage-sensitive services items showed significant disinflation, offsetting stickiness in some government-linked administered prices.
Excluding government-linked prices, which are being impacted by tax increases and backward-looking indexation, we estimate median inflation across private-sector items is now tracking at 2.1% yoy.
Looking forward, the recent escalation in US tariffs on key trading partners—particularly China—poses downward risks to imported goods prices in our view, including items like clothing and furniture.
While the impact is highly uncertain, we estimate the redirection of trade away from the US could subtract 20-50bps from headline inflation in Australia over the next 12-24 months.
Combining these estimates with the softer signal from recent data, we lower our year-ended headline inflation forecasts to 2.8%yoy in 4Q 2025 (prior 3.0%yoy) and 2.4%yoy in 4Q2026 (prior 2.5%yoy).
We also lower our year-ended trimmed-mean inflation forecasts by 10bps to 2.4% yoy over both 2025 and 2026.
From a policy perspective, the lower path for inflation gives RBA scope for further easing, particularly given the balance of risks around economic activity has also shifted to the downside.
We continue to expect the RBA to resume its easing cycle in May, followed by sequential cuts in July and August to a terminal rate of 3.25%, but see risks skewed to the downside.
Yep.
