Aussie Q3 CPI - what are the risks?

Australia’s Q3 CPI will be released on 30 October and just before the RBA Board meeting on 4-5 November.

We released an early preview nearly a month ago (see here) and we have had more time to digest a range of indicators since then.

We still expect the headline CPI to have risen by +0.3% q/q, with a ~0.6ppts drag from lower automotive fuel and electricity prices.

Our initial estimate for Q3 trimmed mean inflation was close to +0.8% q/q, which would be similar to the Q2 outcome and in line with the RBA’s August SMP forecast.

We are now flagging downside risks to that preliminary trimmed mean estimate, in part informed by several survey indicators released over the past month (see below).

Our central case remains for the RBA to start easing policy in February next year. It would likely take an abrupt deterioration in labour market conditions to get a rate cut before February.