Here's Some Data That Suggests The RBA Might Look Through Yesterday's Low Headline CPI Print

Getty/David McNew

The interest rate bulls are convinced the RBA will cut next week. More so today than yesterday because veteran commentator Terry McCrann suggested that as the RBA downgrades its outlook for growth and inflation a cut is a near certainty. In contrast, Saul Eslake thinks the opposite.

The bears however – or at least those who don’t believe the case is yet made for a cut next week – cite the sharper than expected increase in the trimmed mean of 0.7% in Q4 CPI yesterday as evidence that the headline rise of 0.2% understates the level of price rises in the economy and say inflation is not yet dead.

So it is worth highlighting data released this morning by the Australian Bureau of Statistics which suggests that the price falls, at least in imports, are concentrated in fuel-related products with other Australian imports buffeted by a falling Aussie dollar.

The ABS found that the import price index rose 0.9% over the quarter and, “depreciation in the value of the Australian dollar had a considerable upward impact on the prices paid for all of Australia‚Äôs major imported products.” The year-on-year print was only 0.3% but the 10 cent Aussie crash that occurred in Q4 and is still occurring has stopped import prices from printing a lower number and arguably turned the trend.

On the other side of the equation, export prices were flat on the quarter, but down 9.1% for the year. The bad news in that is that the big difference in the prices of imports and exports over the course of the year reflects the fall in Australia’s terms of trade.

Which means lower national income and weaker economic outlook.

But in the context of current debate about whther or not the RBA will cut next week it’s imports and the fact that almost everything beside fuel was higher that means the RBA easing may not be the fait accompli many are now suggesting.

Here’s the table.

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