CPI disappointed, coming in at 1.0% for the March quarter, against expectations of 0.8%. The year-on-year measure declined to 3.6% but there are some worrying signs for the RBA.
Non-tradable inflation — reflecting domestic goods and services as opposed to imports — remains high at 5.0%.
That includes rent inflation which jumped to a year-on-year rate of 7.8%.
It is also distorted by low electricity price inflation at 2.0% which has been adjusted downwards by inclusion of government Energy Bill Relief Rebates. The increase before rebates is 17.0% according to the ABS.
Alex Joiner from IFM Investors shows the Sticky Inflation rate for Australia, calculated using the Atlanta Fed methodology, is at a similar rate to non-tradable inflation:
Conclusion
Prospects of rate cuts from the RBA in 2024 are fading. Long-term government bond rates jumped on release of the report, with the 10-year AGB yield rising to 4.38%. Rising long-term rates are bearish for stocks but particularly for A-REITs.
Acknowledgements
- ABS: Consumer Price Index, Australia – March Quarter 2024
- Alex Joiner, Chief Economist at IFM Investors