According to information released by both the Reserve Bank of Australia and the Australian Bureau of Statistics, the country’s Consumer Price Index (CPI) rose by 0.8% in the second quarter (quarter-on-quarter), surpassing expectations of 0.7% and the previous quarter’s 0.6%.
In yearly terms, the CPI rose by 3.8% the second quarter, in line with expectations but below the previous reading of 1.1%.
The trimmed mean CPI rose by 0.5% in the second quarter (QoQ), in line with expectations and higher than the previous quarter’s 0.3%. In yearly terms, the trimmed mean CPI went up by 1.6%, in line with expectations and higher than the previous quarter’s 1.1%.
Anaylsts at ING stated that despite being slightly higher than previously forecasted, they expect Australian policymakers to dismiss inflation as a transitory phenomenon.
"So this doesn't look at all like what is going on in the US, where the run-rate of CPI really has picked up dramatically, making it more than just a base-driven increase," the analysts commented. "So underlying inflation is rising. It just isn't rising very fast. And it still looks quite subdued relative to the RBA's 2-3 percent longer-term target, which as we all now know, they aren't too worried about exceeding in the short-term.
This implies that the Reserve Bank of Australia probably won't be alarmed by this data, though it eventually will admit that a cash rate hike is possible before 2024. In any case, if there's a change in the bank's forward guidance, it probably won't be due to this data.
Just like the rest of the world, Australia keeps struggling with the spread of the COVID-19 virus, which so far has infected 33,473 individuals and led to 922 deaths, making it one of the least affected countries in the developed world. The country is currently facing the spread of the delta variant, which is believed to be more transmissible than other strains.
The government has already distributed 11.4 million of vaccine doses among the local population, while 3.45 million are now fully vaccinated, which accounts for 13.6% of the population.
Compared to other countries, Australia's vaccination program is advancing slowly and the results are still below the government's 75% - 80% target. This is not due to supply problems, but due to resistance to vaccination in the general population.
The advance of the pandemic has been devastating for the economy, as the country is at risk of facing two technical recessions this year. This, according to analysts, is due to the lockdowns in areas like the states of Victoria, South Australia and New South Wales, which are already hindering the performance of both the tourism and retail sectors.
Since the beginning of the week, the Australian dollar has lost ground against the US dollar, dropping by 0.06 and closing Tuesday's session at the 0.7360 level, falling for the fifth consecutive week. By 4:05 GMT, the Aussie remained almost steady against the greenback, going down by 0.01% and falling to the 0.7359 level.