For the second quarter in a row the size of the movement in the quarterly Consumer Price Index will be irrelevant to the future direction of interest rates and monetary policy, except as a statistical oddity.
The June quarter’s CPI inflation is likely to fall by around 1.8% to 2% when the data is released on Wednesday by the Australian Bureau of Statistics ABS), making one of the largest falls in the series’ history.
That will reflect the brief and now abandoned “free childcare”, a 20% plunge in petrol prices, plunging travel and holiday costs and falling rents.
That in turn will see the first-ever recorded fall in the annual inflation rate of around 0.5% (certainly since 1962), according to estimates from market economists, against an annual rate in the year to March of 2.2%.
Underlying inflation is expected to fall to just 0.2% quarter on quarter, producing an annual rate of 1.5%.
But the solid rebound in petrol prices and the end of free childcare will see headline inflation bounce back in the current (September) quarter.
All this though is immaterial to the Reserve Bank and its current policy stance of keeping interest rates low for as long as possible (it’s targeting the three-year bond rate to keep it at the cash rate level of 0.25%.
Elsewhere the ABS releases its latest household impacts of COVID-19 survey today and payroll jobs data (tomorrow) for early to mid-July – will the problems in Melbourne appear?
There’s also building approvals for June on Thursday and international trade and producer prices for the June quarter.
June 30 earnings reports step up this week with the most-watched will be the half-year figures from Rio Tinto late in the week.
Australian Foundation Investment Co annual figures today, GUD later in the week, as well as Credit Corp, Janus Henderson, Cimic, Genworth Mortgage Insurance, and UR Westfield (both quarterly).
The final group of quarterly reports from the resource sector will be issued this week from Iluka Resources, Fortescue Metals, OceanaGold, Sandfire Resources, and Infigen Energy.
Macquarie Group has its annual meeting and trading update for the June quarter on Thursday.
