CHART: Why New Zealand's inflation report is not a proxy for Australian CPI

New Zealand is about to release its Q2 CPI report, a figure some deem to be a proxy for what’s likely to happen when Australia’s CPI report is out in two weeks.

If you’re considering doing the same, Jo Masters, senior economist at ANZ Bank, has some simple advice for you: don’t.

This chart explains why.

Source: ANZ

Clearly what happens in one antipodean nation does not automatically translate to the other when it comes to CPI reports. They often surprise in opposite directions, and when they do surprise in the same direction, it’s often to vastly differing scales.

As Masters wrote on Twitter, “I’d caution against drawing parallels to Australia’s CPI. There’s plenty of differences driving the numbers.”

Hear hear.

Markets are looking for a quarterly increase in CPI of 0.2%, leaving the year-on-year rate at 1.9%. The RNBZ’s inflation target is 1-3%.

You can follow Jo on Twittere here.

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