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Fin-X Pulse - Australian Inflation August 2024

Brett Careedy


Australian monthly CPI fell in line with estimates. But the trimmed mean measure, the focus of the RBA, was also slightly below end-2024 forecasts, suggesting that a rate cut in early 2025 is increasingly likely. China also loosened monetary policy this week in an effort to stoke lending.


  • The ABS' monthly estimate of Australian CPI fell from +3.5% yoy in July to +2.7% yoy in August, in line with market estimates.

  • The trimmed mean measure of underlying/core inflation fell from +3.8% yoy to +3.4% yoy.

  • CPI inflation excluding volatile items and holiday travel was +3.0% yoy in August, down from +3.7% yoy in July.

  • Falls in Automotive fuel and Electricity were significant moderators of annual inflation in August.

  • Automotive fuel was down -7.6% compared to August 2023, as transport prices dropped by -1.1% yoy.

  • For Electricity, the combined impact of Commonwealth Energy Bill Relief Fund rebates and State Government rebates in Queensland, Western Australia and Tasmania, drove the largest annual fall in electricity prices on record of -17.9%. 

  • The top positive contributors to the annual change were Housing (+2.6%), Food and non-alcoholic beverages (+3.4%), and Alcohol and tobacco (+6.6%).

  • Michelle Marquardt, ABS head of prices statistics, said: “Annual inflation [at +2.7%] is the lowest reading since August 2021 [...] Both measures of annual underlying inflation in August are the lowest they have been for 2.5 years”.

  • "The falls in electricity and fuel had a significant impact on the annual CPI measure this month", said Ms Marquardt. “Commonwealth Government and State Government rebates led to a 14.6 per cent fall in electricity prices in the month of August, which followed a 6.4 per cent fall in July. Excluding the rebates, electricity prices would have risen 0.1 per cent in August and 0.9 per cent in July”.

  • The PBOC kept Chinese 1yr Med.-Term rates on hold today, after cutting the 14-day reverse repo rate by -0.1% to 1.85% and the 7-day reverse repo rate by -0.20% to 1.50% this week. The major bank Reserve Ratio Requirement (RRR) was also reduced from 10.0% to 9.50%, increasing lending capacity.

  • S&P/ASX200 8,141 (unch), AUDUSD 0.6895 (unch), Aus 2yr 3.60% +5bps, Aus 10yr 3.92% +4bps


Fin-X Wealth View

  • After keeping rates on hold yesterday, the RBA said that it would look past the impact of the electricity rebates and focus on the trimmed mean measure as a better predictor of forward inflation.

  • The governor confirmed at the press conference that a rate rise was not discussed.

  • Today's trimmed mean figure of +3.4% yoy is below the RBA's +3.5% yoy estimate for December included in the August SMP, which suggests that the Board might be open to discussing a rate cut a little sooner than anticipated.

  • Some caution is warranted since the monthly estimate is not viewed to be as accurate or reliable as the full set of quarterly figures, which are due out on 30th October.

  • If the Q3 figure turns out to be a little more benign there is a small chance of a cut on Melbourne Cup day, when the next SMP forecasts are also produced. However, this is only a small chance, since a further loosening in the labour market or a negative global growth shock is likely also required. The market is pricing a 20% chance, which seems about right.

  • There is a much higher chance of a cut after the summer break on February 18th, when the next round of forecasts are also set to be released. The market is pricing a 100% chance of a cut by the end of February, with a roughly 2/3 chance that this will be a second cut, bringing the cash rate to 3.85%.

  • Global bond markets are increasingly concerned by slowing growth and rising unemployment in the US and China, and much lower inflationary risks.

  • The Chinese changes are aimed at stimulating lending by the banking sector by increasing balance sheet capacity and making safer deposits slightly less attractive.










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