New Zealand inflation surged last quarter but that doesn't mean the same outcome will be seen in Australia

Chris Ratcliffe/ Getty Images.
  • New Zealand CPI rose sharply in September quarter, lifting by 0.9%, the steepest increase since early 2017.
  • If you’re banking on a similar outcome in Australia’s CPI report next week, you’ll be interested in the charts below.
  • Australia’s Q3 CPI report will be released on Wednesday, October 31.

Australia will receive its September quarter consumer price inflation (CPI) report next week.

After observing a large increase in New Zealand’s Q3 CPI report earlier this month, it’s understandable why some traders may think a similar outcome may been seen in Australia.

They are both medium-sized commodity-rich economies with floating exchange rates, after all.

However, if you’re toying with the idea of positioning for a hot inflation print, and the potential for an earlier start to the Reserve Bank of Australia’s (RBA) rate tightening cycle than markets and economists currently expect, these three charts from Macquarie Bank provide some food for thought.

The first shows the quarterly movement in tradable inflation — those prices influenced by offshore factors — in New Zealand and Australia going back to 2008.

Macquarie Bank

There’s not much of a relationship at all, an important consideration given tradable inflation accounts for just shy of 40% of Australia’s CPI basket.

Nor is there a close relationship between movements in quarterly non-tradable inflation in Australia and New Zealand over the same period.

Macquarie Bank

Unsurprisingly, when the two are combined together, the quarterly change in headline CPI in one nation is often very different to that seen in the other.

Macquarie Bank

So while the 0.9% jump in New Zealand CPI last quarter could be replicated in Australia, history suggests there are plenty of reasons to be cautious.

The ABS will release Australia’s Q3 CPI report on Wednesday, October 31.

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