Aussie August Monthly CPI Preview

Electricity subsidies to spark big fall in headline inflation

Australia’s August monthly CPI will be released next Wednesday, 25 September.

This release can be used in conjunction with the July monthly CPI to provide estimates for headline and trimmed mean Q3 CPI inflation. The downside ‘miss’ in Q2, however, is a good reminder that several missing pieces must still be guesstimated when compiling nowcasts.

We expect year-ended headline CPI inflation to have slowed sharply to +2.6% y/y in August, down from +3.5% y/y in July.

This reflects the dropping out of a +0.6% m/m increase in August 2023 and our expectation for a -0.3% m/m outcome for this August, reflecting sharply lower out-of-pocket electricity prices (we have pencilled in -16% m/m), seasonally lower holiday travel prices and weaker petrol prices.

Underlying measures on inflation are more important, including for the RBA, though the monthly measures are far from perfect. The CPI excluding ‘volatiles’ and travel measure will slow sharply to a little over +3% y/y due to the anticipated large decline in electricity prices in August.

For that reason, we have also calculated a measure which also excludes electricity prices. On that basis, we anticipate CPI inflation slowed to +3.5% y/y in August from +3.8% y/y in July.