Aus inflation

Aus CPI is out, somewhat above (meaning bad) consensus.

There’s very little here to give the RBA pause.

The below is the monthly aggregate, which is a relatively new indicator for the ABS.

That just means more pressure on interest rates (e.g. tighter for longer).

The retail sales data was also released, and it is likely too hot for comfort. The size of the spike does suggest that relatively newish things like the importance of Black Friday sales, Cyber Monday etc, might be making the data slightly harder to read/normalise for.

All that said, the intraday reactions are interesting. The market does not seem to think our inflation is as sticky as the latest update seemed to imply, else we’d see yields higher, the FX higher, and duration like property and the broader market lower.

Clear as mud.

In our direct portfolios, we’ve good a goodly amount of financials exposure, to the insurance companies that benefit from higher returns to float, and banks that “should” be able to leverage higher rates into higher NIMs.

We’ve also got a decent enough amount of commodities (IPL, NCM, BHP, AWC) which generally offer decent “inflation hedge” type characteristics.

Stocks like AZJ (Aurizon) also offer WACC + regulatory resets, and so should be able to recover inflationary impacts, as do stocks with pricing power (TCL, AMC).

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