Aus macro/CPI/employment

The monthly CPI was released earlier today, slightly better than expected, at 3.4%, see the third row, first and second columns.

In general, we think grinding progress to the RBA’s target (2%-3%) continues, although it has been stuck at ~3.4% for the past quarter.

That said, Zac Gross, an Australian academic, does publish a table very similar to that of Jason Furman, in the US (Jason uses an ecumenical measure of some 24 different inflation measures, and that’s the idea behind the table below published by Zac), and it doesn’t look especially great, with various shades of an angry (meaning elevated) red colour.

The “last mile” of inflation has been a little stubborn, here, as well as elsewhere. Seasonality, possibly, in the trimmed and weighted means.

Still, we think it is very difficult to imagine that ~400-500bps worth of interest rate hikes can’t or won’t do the job (unless the natural rate has risen a lot, which we also think is unlikely) but it is fair to say another few prints like this one and you’ll get the “we need another round of hikes” crowd vocal again, particularly given last week’s employment print.

Just briefly, on that print (we wrote a note pointing to our stern disbelief in the numbers) CBA had a good graph highlighting some of the banks’ prop data, e.g. salary payments. It is a) short run b) the dreaded “dual axis” plot, but still a pretty powerful indicator that Feb might have been an anomaly.

The hawkish road, if taken, eventually leads to a hard landing, we think, given elevated mortgage debt, and the preponderance of variable rate mortgages.

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