TD Securities monthly inflation gauge for August has just been released and once again shows that inflation remains subdued in Australia.
Even though it is the highest since November 2014 with an increase of just 0.1% to 140.80, the inflation index rose by 1.7% in the 12 months to August. The trimmed mean (which excludes volatile items) rose just 1.5% through the year to August.
TD Securities said that driving the increase in August “were price rises for international holiday travel and accommodation (+4.0 per cent), newspapers, books and stationery (+5.5 per cent) and alcoholic beverages (+0.8 per cent). These were offset by price falls in fuel (-2.1 per cent), domestic holiday travel and accommodation (-2.0 per cent) and fruit and vegetables (-0.5 per cent).”
This result is unlikely to influence the RBA tomorrow but Annette Beacher, Chief Asia-Pac Macro Strategist at TD Securities, said:
Australian financial markets have been beaten up in recent weeks, the unexpected regime changes in China playing a significant role. However, confusing the flight to safety rally in bond yields with expectations of imminent RBA easing is rife. In contrast, we expect the RBA Board tomorrow to keep a cool head, looking through the extraordinary volatility of recent weeks. The Board is expected to leave the cash rate at 2 per cent and welcome the decline in the exchange rate, as was the case last month.