<p>Just a few months after acquiring a prime Broadbeach site on the corner of First Avenue and Surf Parade, family-run developer <a href="https://www.apartments.com.au/developers/raptis">Raptis</a> has filed fresh plans for a new apartment development.</p>

<p>Raptis is seeking to deliver a <a href="https://www.apartments.com.au/new-apartments/17-19-first-avenue-broadbeach-qld-4217">29-storey tower with 73 apartments</a> on the 818 sqm site. It will be the developer's seventh project in the suburb, as they are approaching completion of The Sterling on George Avenue.</p>

<p>There will be a pool, barbecue and outdoor dining area, residents lounge and dining, sauna and steam room, gym, and a Yoga and Pilates studio.</p>

<p><img alt="Raptis" data-entity-type="file" data-entity-uuid="b554da3f-7344-49aa-b1c9-44cf459af0d7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-05%20at%2010.41.45%E2%80%AFAM.png?VersionId=zzjWu1iO1wnuYv4EV4fyOyf5nSXjGYut" /></p>

<p>Raptis Joint Managing Director, Evan Raptis, says they remain&nbsp;committed to developing quality infill sites across the Gold Coast in the lead-up to the 2032 Brisbane Olympics.</p>

<p>"This project continues our long track record of delivery in Broadbeach, and we look forward to bringing another premium development to this thriving precinct."</p>

<p>The announcement follows strong delivery momentum for Raptis, with The Sterling Broadbeach nearing completion and construction well underway on the final stage of the Waterpoint community adjacent to Harbour Town. The developer's continued investment in the Gold Coast reflects confidence in the region's apartment market fundamentals, underpinned by sustained Southeast Queensland population growth.&nbsp;</p>

<p>The outlook for the region is further bolstered by infrastructure investment tied to the Brisbane 2032 Olympic Games, which is expected to drive continued economic and population growth across the SEQ corridor.&nbsp;</p>

<p>Subject to a favourable response from Gold Coast City Council, construction on the new First Avenue tower is targeted to commence before the end of 2026.&nbsp;</p>

<p><em>Read more:&nbsp;<a href="https://www.apartments.com.au/news/qld/it-s-all-in-the-family-four-decades-later-raptis-continues-to-shape-the-gold-coast-skyline">It’s all in the family: Four decades later, Raptis continues to shape the Gold Coast skyline</a></em></p>

<p><em>Read more: <a href="https://www.apartments.com.au/news/qld/raptis-secures-prime-surf-parade-site-for-next-broadbeach-apartment-development">Raptis secures prime Surf Parade site for next Broadbeach apartment development</a></em><br />
&nbsp;</p>


Gold Coast developer brings seventh Broadbeach project to market, targeting construction commencement before year end

Joel Robinson

First look: Raptis lodges plans for new 29-storey Broadbeach tower 

<p>Brisbane development veteran Kevin Seymour's Seymour Group is set to deepen its presence on one of Brisbane's most tightly held riverfront addresses, lodging revised plans for a luxury apartment development on Oxlade, just a few doors down from The Oxlade, which it completed in 2024.</p>

<p>The <a href="https://www.apartments.com.au/new-apartments/70-72-oxlade-drive-new-farm-qld-4005">new project at 70-72 Oxlade Drive</a>, directly north of The Oxlade, will have 27 apartments across a seven-storey building&nbsp;overlooking the Brisbane River and Merthyr Park. It's a revision from a 2021-approved design.</p>

<p>Designed by bureau^proberts, the project has evolved from the previously approved 26-apartment scheme, introducing an additional penthouse level while maintaining a low-density, boutique character. The development will comprise 26 three-bedroom apartments and a single four-bedroom penthouse, supported by two basement levels with 86 car spaces and 34 bicycle spaces.</p>

<p>The architectural response is centred around two distinct building forms separated by a landscaped open-air atrium.&nbsp;"This dual composition captures and embraces Brisbane’s subtropical environment whilst breaking down built form and scale," the submission to the Brisbane City Council noted.</p>

<p><img alt="First look: Seymour Group returns to Oxlade Drive with revised riverfront apartment plans in New Farm" data-entity-type="file" data-entity-uuid="c12d84d0-bc11-4067-b46f-5bd2d786a34d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/new%20farm%20landscape.png?VersionId=YEPc2k5CAdh6aAPlu4uVpgZadh4MEfRd" /></p>

<p>A defining feature of the design is a deep landscaped void running through the centre of the building, creating what bureau^proberts describes as a "natural ravine" that enhances airflow, daylight penetration and resident amenity. The design report notes that the separation of the two building volumes is intended to maximise natural light, cross-ventilation and outlook while strengthening connections to the surrounding riverfront setting.</p>

<p>Curved balcony edges, integrated planting and extensive landscaping throughout the façade reinforce the subtropical design approach. The building's façade is softened by elevated gardens and planter beds, creating a green edge that complements the established landscape character of Oxlade Drive and neighbouring Merthyr Park.</p>

<p>New Farm has become one of Brisbane's most sought-after suburbs for developers delivering premium downsizer-focused apartments.</p>

<p>GRAYA has been particularly active in the precinct, completing both Chalk and York in recent years, while construction of Moray House, being delivered for Spyre, is now nearing completion. Architect-turned-developer Joe Adsett recently launched <a href="https://www.apartments.com.au/new-apartments/arcilla-new-farm-by-joe-adsett-28-maxwell-street-new-farm-qld-4005">Arcilla on Maxwell Street</a>, an exclusive collection of just nine apartments.</p>


First look: Seymour Group returns to New Farm's Oxlade Drive with riverfront apartment plans

<p>A new residential tower will be the first piece of a broader mixed-use precinct set to reshape a prominent Newcastle West site, with local developer <a href="https://www.apartments.com.au/developers/gwh">GWH</a> bringing its <a href="https://www.apartments.com.au/new-apartments/cambridge-quarter-newcastle-west-12-denison-street-newcastle-west-nsw-2302">Cambridge Quarter</a> vision to market.</p>

<p>The first release, Tempo, will introduce 87 apartments across a 24-storey tower, marking Stage 1 of the residential component of a larger urban regeneration project planned for the western end of Newcastle's city centre, encompassing the former Cambridge Hotel site.</p>

<p>Positioned on Denison Street, Tempo has been designed as the inaugural building within Cambridge Quarter, a precinct that will ultimately combine apartments, retail activation and revitalised public spaces including the revamping of the Cambridge Hotel.</p>

<p>[smartcode_project:default project_id=135876 project_image_fid=368856]</p>

<p>The tower will comprise a mix of one, two and three-bedroom apartments, including layouts with multipurpose rooms, catering to a broad cross-section of owner-occupiers. Apartment sizes range from around 60 sqm to 192 sqm, with a number of residences oriented to capture views across Newcastle Harbour, the city skyline and coastline.</p>

<p>GWH has emphasised liveability in the design, with open-plan layouts extending to generous balconies and terraces. Residents will have a choice of two interior palettes, while specifications include engineered stone benchtops, SMEG appliances, full-height bathroom tiling and secure building access. Premium upgrade packages will also be available</p>

<p>Multiple rooftop resident retreats will provide communal outdoor space overlooking the harbour and city, offering an elevated amenity layer above the activity of the precinct below.</p>

<p>[smartcode_project:default project_id=135876 project_image_fid=368851]</p>

<p>The broader Cambridge Quarter vision extends beyond the residential tower itself. Ground-level retail activation and landscaped public areas are planned throughout the precinct, creating a walkable neighbourhood environment connected to the surrounding renewal of Newcastle West. The Cambridge Hotel is also earmarked for future redevelopment into a family-friendly hospitality venue integrated with the new precinct.</p>

<p>The project is strategically positioned within walking distance of Newcastle Interchange, providing access to light rail, regional rail services and direct connections to Sydney. Residents will also be close to Honeysuckle, Newcastle Harbour and the city's beaches and coastal walkways.</p>

<p>[smartcode_project:default project_id=135876 project_image_fid=368852]</p>

<p>For GWH, Cambridge Quarter represents one of its most significant Newcastle developments to date. The locally based developer, which has operated in the Hunter region since 1995, describes the project as a new chapter in the ongoing transformation of Newcastle West.</p>

<p>GWH Executive Director Jonathan Craig said the project had been shaped by a focus on creating lasting community connections.</p>

<p>"We take pride in creating places that last. Spaces where people feel connected, comfortable and a genuine sense of belonging," Craig said.</p>

<p>"Cambridge Quarter is something we are truly proud of, a place shaped by local knowledge, built with care and designed to be part of Newcastle's next chapter."</p>

<p>[smartcode_project_cta:default project_id=135876]</p>


GWH unveils first release at landmark Cambridge Quarter precinct in Newcastle West

<p><a href="https://www.apartments.com.au/developers/ss-projects">S&amp;S Projects</a>,&nbsp;Rainbow Bay's busiest developer,&nbsp;has officially lodged plans for the largest development in its booming local portfolio, seeking approval for a further 88 apartments on Boundary Street.</p>

<p>The proposal&nbsp;at <a href="https://www.apartments.com.au/new-apartments/209-213-boundary-street-coolangatta-qld-4225">209–213 Boundary Street, Coolangatta</a>,&nbsp;marks the next chapter in the developer's transformation of the southern Gold Coast beachside precinct. It will be its fifth in the area, having already delivered Flow, Awaken and Esprit, while construction continues on the 38-apartment Radia. The new project would rise 57 metres above a consolidated 1,518 sqm site, on the same street as Radia and Esprit.</p>

<p>&nbsp;</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/cottee-parker-architects">Cottee Parker</a>, the proposed development comprises 88 two and three-bedroom apartments across a contemporary podium-and-tower form that integrates extensive landscaping from street level through to the rooftop.</p>

<p>The tower would be delivered above a basement and multi-level podium accommodating resident and visitor parking, with the residential component commencing from level three. The design incorporates cascading planting throughout the façade, landscaped podium edges, and deep planting zones along the Boundary Street frontage.</p>

<p><img alt="First look: S&amp;S Projects lodges plans for 88-apartment wellness tower at Coolangatta's Boundary Street" data-entity-type="file" data-entity-uuid="677e6615-b5c0-4b6c-b4f9-efb14fcde1a6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/ss%20da%20pers.png?VersionId=YOnPKQm7IFXv0M5H326djEpxk80500Hi" /></p>

<p>A key feature of the development is its expansive rooftop wellness and recreation precinct. Plans reveal a resort-style pool deck, gymnasium, sauna, steam room, hot and cold plunge pools, rooftop terraces, barbecue areas and landscaped relaxation spaces positioned to capture views across the southern Gold Coast coastline.</p>

<p>The rooftop wellness focus builds on the vision S&amp;S Projects first outlined when it acquired the site for $20.25 million last year.</p>

<p>"We are taking every advantage to create a truly unique rooftop wellness experience with a natural feel for residents, offering stone features throughout and an underlying theme that emulates a botanical garden," S&amp;S Projects founder and director Paul Gedoun said at the time.</p>

<p>The proposal seeks a 57-metre building height, representing a 50 per cent uplift on the site's mapped 38-metre height limit. Planning documents argue the additional height is consistent with recently approved and emerging towers in the immediate Boundary Street and Rainbow Bay precinct.</p>

<p>Urbis, acting as planning consultant, said the development would provide "88 dwellings, comprising a mix of two and three-bedroom apartments, contributing to housing choice and supply within an established medium to high-rise coastal urban neighbourhood."</p>

<p>The scheme has undergone extensive pre-lodgement consultation with the City of Gold Coast, with the design refined following feedback relating to architectural expression, landscaping, traffic access and podium treatment.</p>

<p><img alt="S&amp;S" data-entity-type="file" data-entity-uuid="0a2d70fd-62ac-4b83-97c6-b798fc1243dd" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-05%20at%209.16.31%E2%80%AFAM.png?VersionId=yHmghUwKM3IVGpBktQU1mE.0Lpf3WimG" /></p>

<p>The architectural team is led by Brisbane-based Cottee Parker, one of Australia's most active residential design studios, with landscape architecture by Dunn + Moran. The consultant team also includes ADG Engineers, Windtech and Acoustic Works.</p>

<p>S&amp;S Projects has become one of the most influential private developers operating on the southern Gold Coast. Since entering Rainbow Bay in 2022, the company has assembled a portfolio exceeding $1 billion in end value, establishing itself as a key player in the area's evolution into a premium apartment destination. Pezet Matheson will again handle the sales for S&amp;S.</p>

<p>Coolangatta is entering another wave of apartment development, following the delivery of several prominent residential projects in recent years.</p>

<p>John Kearney's Immerse Projects will launch&nbsp;<a href="https://www.apartments.com.au/new-apartments/kaiya-kirra-beach-5-haig-street-coolangatta-qld-4225">Kaiya on Haig Street</a>&nbsp;soon, meanwhile, Palm Beach-based Sherpa Property Group is preparing to bring its debut Coolangatta development, <a href="https://www.apartments.com.au/new-apartments/flourish-viver-87-griffith-street-coolangatta-qld-4225">Flourish Viveré</a>, to market later this year, subject to approvals.</p>


First look: S&S Projects proposes 88-apartment wellness tower at Coolangatta's Boundary Street

<p>A landmark former orphanage site in Surrey Hills could be transformed into a new residential community under plans lodged by <a href="https://www.apartments.com.au/developers/antipodean-land-developments">Antipodean Land Developments</a> that would deliver 76 apartments and townhouses while restoring some of the suburb's most significant heritage buildings.</p>

<p>The burgeoninng Melbourne-based developer has submitted plans for the 9,158 sqm site at 1 Kent Road and 24 Durham Road, home to the former St Joseph's Home for Destitute Children, a historic institutional complex dating back to the late 19th century. The proposal seeks to adaptively reuse several heritage buildings while introducing two new four-storey residential buildings set within extensive landscaped grounds.</p>

<p>Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> and Kerstin Thompson Architects, the project has been conceived as a contemporary residential village embedded within a restored heritage precinct. The development team describes the design approach as "The Village in the Garden," with new buildings positioned among mature landscaping by OCULUS and significant heritage structures.</p>

<p><img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="44ec8c1b-c0b6-44ae-859e-5811b3e6a023" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%281%29.png?VersionId=p.p1_KFh4iQoV4nisdnPfQBAsWNi7m79" /></p>

<p>The proposal would deliver 76 dwellings comprising a mix of apartments and duplex-style residences, significantly increasing housing supply on one of the largest privately held residential landholdings in Surrey Hills. The development includes 127 car spaces, 24 bicycle spaces and more than 1,000 sqm of communal amenity, with the existing chapel building earmarked for conversion into resident facilities.</p>

<p>According to the planning submission, the project centres on the restoration and adaptive reuse of the site's most significant heritage assets, including the original c.1889 St Joseph's building, the chapel designed by architect Augustus Andrew Fritsch, and the historic brick perimeter walls and entry gates. The proposal also incorporates the retention of other contributory buildings including the former infirmary and school building.</p>

<p>Tract Consultants, in the planning report accompanying the application, said the scheme had been shaped through extensive heritage analysis and design development.</p>

<p>"The shared vision for the Site by the project team has culminated in a scheme which successfully breathes life back into a historic site while delivering upon the objectives of Victoria's Housing Statement in a carefully curated and contextually responsive manner."</p>

<p><img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="7263b7d8-95ea-400f-9531-6ca7d22c3c33" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%282%29.png?VersionId=4cR1tiWOsDpgxEOwZi5vVFcyvvOsYkIE" /></p>

<p>The proposal is being assessed under Victoria's Significant Residential Development with Affordable Housing pathway. As part of the application, three per cent of the project's residential development cost would be contributed to the Social Housing Growth Fund. The development would also provide a diverse mix of one, two and three-bedroom residences targeting a broader range of buyers than typically found in Surrey Hills' detached housing market.</p>

<p>Sustainability initiatives include an anticipated 66 per cent BESS score, natural cross-ventilation to 80 per cent of apartments, 28 per cent deep soil landscaping and a canopy cover outcome exceeding local planning requirements. The proposal also sets aside more than 1,083 sqm for communal indoor and outdoor resident amenity spaces.</p>

<p><img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="33fad46f-fe26-4d0a-acfd-6b776e1c6a3d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design.png?VersionId=D9F6WVSyYCtGvSUmith35LRp6R7PQkw_" /></p>

<p>Planning documents describe the property as one of the largest underutilised residential sites in Surrey Hills, arguing it presents a rare opportunity to introduce "missing middle" housing in an established inner-eastern suburb while preserving and revitalising a significant heritage precinct.</p>

<p>Antipodean Land Developments has built a reputation for design-focused residential projects across Melbourne, particularly in the medium-density sector. Previous developments include Neighbourhood in Brunswick East, delivered with Breathe Architecture, and Balfe Park Lane, designed by Kerstin Thompson Architects.</p>

<p>They've been very active in site acquisition as they build out their future development pipeline. They recently launched Thornubury House, 45 apartments above a mix of commercial, retail, and food and beverage tenancies, and have plans for a boutique project in Fitzroy and another <a href="https://www.apartments.com.au/news/vic/antipodean-plan-apartments-for-deepdenes-missing-middle-on-whitehorse-road">"missing middle" project</a> on Deepdene's Whitehorse Road.</p>


First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills

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<p class="introbullets">GUEST OBSERVER</p>
<p class="introbullets">The Q3 CPI printed 0.7 percent compared to Westpac’s forecast for 0.9 percent. The market median was 0.5 percent. The annual rate is now 1.3 percent/yr compared to 1.0 percent/yr in Q2 and 1.3 percent/yr in Q1. The June quarter was the lowest rate of annual inflation since June 1999.</p>
<p class="introbullets">The core measures, which are seasonally adjusted and exclude extreme moves, rose 0.3 percent compared to the market’s expectation of 0.4 percent rise. Westpac’s forecast was also 0.4 percent. In the quarter, the trimmed mean gained 0.35 percent while the weighted median lifted 0.28 percent. The annual pace of the average of the core inflation measures is now 1.5 percent/yr from 1.6 percent/yr in Q2 (originally reported as 1.5 percent/yr) and Q1 (Q1 has been revised from an original estimate of 1.4 percent/yr).</p>
<p class="introbullets"><a href="/images/2016/10/26/Screen%20Shot%202016-10-26%20at%201.32.55%20PM.png" target="_blank">Click to enlarge</a></p>
<p class="introbullets"><img src="/images/2016/10/26/Screen%20Shot%202016-10-26%20at%201.32.55%20PM.png" alt=""></p>
<p class="introbullets">The six month annualised pace of core inflation came in 1.7 percent/yr pace, a lift from 1.5 percent/yr in Q2 and the fifth quarter in a row it has been below the bottom of the target band; lowest six month annualised pace since the 1.3 percent/y print in March (a seventeen year low).</p>
<p class="introbullets">Our top of the market forecast was based on large contribution from fresh fruit &amp; vegetables boosting a solid contribution from electricity bills. Fresh &amp; fruit &amp; vegetables rose as expected (11.6 percent) but total food was slightly softer at 1.7 percent (our forecast was 2.1 percent) due to softer prices elsewhere in this grouping. We suspect the ongoing competition from new entrants is keeping disinflationary pressure in this sector.</p>
<p class="introbullets"><a href="/images/2016/10/26/Screen%20Shot%202016-10-26%20at%201.38.43%20PM.png" target="_blank">Click to enlarge</a></p>
<p class="introbullets"><img src="/images/2016/10/26/Screen%20Shot%202016-10-26%20at%201.38.43%20PM.png" alt=""></p>
<p class="introbullets">The lift in electricity bills was there but it was about half of what we had expected with utilities lifting 2.5 percent vs our expectation for 5.7 percent. Rents rose 0.3 percent (0.2 percent expected) while dwelling purchases lifted 0.4 v (as expected). All up housing rose 1.0 percent vs our expectation for 1.4 v (a 0.23ppt contribution vs 0.31ppt forecast).</p>
<p class="introbullets">Two areas of upside surprise were clothing and footwear (0.3 percent vs –0.1 percent expected) and household contents &amp; services (1.1 percent vs 0.8 percent expected). While this is only a modest upside surprise it does suggest we are finally seeing some pass–through from the earlier devaluation of the AUD and higher raw input costs.</p>
<p class="introbullets">The modest gain for housing has been key to holding down core inflation. The large rise in electricity bills is trimmed out of the core measures while the subdued gains for dwellings and rents remain in. In the quarter dwelling price gains eased back in Sydney (0.5 percent from 1.5 percent in Q2 and 0.5 percent in Q1) as did Brisbane (0.4 percent from 0.9 percent in Q2 and 0.4 percent in Q1) while Melbourne has picked up the pace (0.8 percent from 0.9 percent in Q2 and 0.5 percent in Q1). Dwelling prices continue to decline in Perth falling 0.4 percent (from –0.1 percent in Q2 and –2.2 percent in Q1).</p>
<p class="introbullets"><a href="/images/2016/10/26/Screen%20Shot%202016-10-26%20at%201.40.06%20PM.png" target="_blank">Click to enlarge</a></p>
<p class="introbullets"><img src="/images/2016/10/26/Screen%20Shot%202016-10-26%20at%201.40.06%20PM.png" alt=""></p>
<p class="introbullets">Non-traded prices rose 0.5 percent in Q3 from 0.4 percent in Q2 which has seen a modest lift in the annual pace to 1.7 percent/yr from 1.6 percent/yr. Given the lift in power bills that boosted this quarter result, and remembering that the September quarter get the usual seasonal boost from the annual repricing of administrated prices, then this is a subdued print.</p>
<p class="introbullets">Traded goods prices rose 1.0 percent/qrt following a 0.6 percent/qtr gain in Q2 and a very weak –1.4 percent in Q1. The September quarter saw something of a reversal for the auto fuel prices (–2.9 percent/qtr vs. +5.9 percent/qtr Q2 and –10% in Q1) while fresh fruit &amp; vegetables build on the modest Q2 gains (11.6 percent compared to 1.7 percent Q2 and –4.3 percent in Q1). However, excluding fuel, food and tobacco traded goods lifted 0.6 percent which is a modest gain from run of softer numbers (–0.3 percent in Q2 and 0.1 percent in Q1). This left this ‘core’ measure of traded goods prices at a very modest 0.9 percent/yr.</p>
<p class="introbullets">So the September quarter was a mixed update with some softness continuing in the non-traded sector but signs of AUD (and rising input costs) inflationary pass-through to clothing &amp; footwear as well as household contents &amp; services. But offsetting this is the clear ongoing competition in the groceries space which is holding down food prices overall. So while we may argue we have seen the low point for core inflation, any acceleration from here is going to be a very mild one. </p>
<p class="introbullets"><em>Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.</em></p>
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jchancellor-FAypfDUnLy

Modest gain for housing key to holding down core inflation: Westpac's Justin Smirk

<html><body>
<p>GUEST OBSERVER</p>
<p>Low inflation: The Consumer Price Index – the main measure of inflation in Australia – rose by 0.7 percent in the September quarter, above expectations for a lift of 0.4-0.5 percent. In seasonally adjusted terms the CPI rose by 0.4 percent. The annual rate of inflation rose from a 17-year low of 1.0 percent to 1.3 percent (seasonally adjusted 1.4 percent).</p>
<p>Underlying measures: The Reserve Bank monitors three measures to derive the underlying inflation rate. The trimmed mean rose by 0.4 percent in the September quarter (1.7 percent annual); the weighted median rose by 0.3 percent (1.3 percent annual) and the CPI less volatile items rose by 0.5 percent (1.7 percent annual). Overall, underlying inflation rose by 0.4 percent in the quarter and by 1.6 percent over the year.</p>
<p>Main changes: Fruit prices rose by 19.5 percent in the quarter with electricity up by 5.4 percent, tobacco up by 2.3 percent, vegetables up 5.9 percent and property rates and charges up 4.0 percent. The CPI was dragged lower by a 2.9 percent fall in petrol prices and a 2.5 percent fall in telecom equipment and services.</p>
<p>What does it all mean?</p>
<p>Inflation has lifted from the canvas, albeit with a lot of help from higher prices for fruit and vegetables. Still, the higher headline rate of inflation will serve to lift key measures of inflation expectations and thus make it more likely that inflation will return to the 2-3 per cent target band in coming quarters.</p>
<p>Underlying inflation remains low: up 0.4 percent in the quarter to be up 1.6 percent for the year. But if recent floods cause more food inflation, this will drive headline inflation, and in turn, lift underlying price measures.</p>
<p>It is clear that inflation is still historically low. So, the Reserve Bank can still cut rates if it wants to take out some insurance on a stronger growth/stronger inflation outcome. So a rate can’t on November 1 can’t be totally ruled out. But financial markets are not betting on it – with pricing suggesting that there is a 6 per cent chance of a rate cut in November. And the Reserve Bank is indeed looking for reasons not to cut rates rather than reasons to reduce rates to new record lows.</p>
<p>It is clear that interest rates will stay low for an extended period. Global competition ensures that retailers can’t lift prices in the current environment. </p>
<p>The Reserve Bank would also welcome the fact that coal, oil and iron ore prices are rising, the US economy remains in good shape, China is still expanding at a near 7 percent annual clip and that European growth is looking better. Inflation still faces challenges in returning to 2-3 percent, but prospects of getting back to the band are looking better.</p>
<p><a href="/images/2016/10/26/Screen%20Shot%202016-10-26%20at%2012.30.11%20PM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/10/26/Screen%20Shot%202016-10-26%20at%2012.30.11%20PM.png" alt=""></p>
<p><em>Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.</em></p>
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Inflation edges its way higher from a 17-year low: CommSec's Craig James

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<p>The latest <span>inflation data</span> was a <span>little stronger</span> than most economists had been expecting.</p>
<p><span>The Aussie dollar</span> has climbed since 11.30am as a consequence.</p>
<p><span>Headline CPI </span>grew by 0.7 percent over the quarter, against 0.4 percent over the June period, bringing the annual rate to 1.3 percent from 1 percent.</p>
<p><span>Core inflation</span> has weakened over the September quarter, with the<span> trimmed mean CPI</span> rising 0.4 percent against the prior 0.5 percent.</p>
<p>It puts the annual rate unchanged at 1.7 percent. The <span>weighted median </span>on a quarterly basis has eased to 0.3 percent from 0.4 percent, with the annual rate steady at 1.3 percent.</p>
<p>Fruit prices pushed inflation higher.</p>
<p>The <span>Aussie </span>has climbed to US77 cents.</p>
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jonathanchancellor-7SQnKwU6yx

Inflation stirs though underlying inflation stays lows

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<p>GUEST OBSERVER</p>
<p>The Financial Stability Review usually is a straight-forward document with few controversial issues raised.</p>
<p>But in the latest report the Reserve Bank has been uncharacteristically forthright, warning banks for the need to be vigilant and continue to maintain tighter lending standards.</p>
<p>The RBA notes that the “risks to the banking system have somewhat increased over the past six months” but “tighter lending practices will, over time, leave the industry better placed to cope with any future deterioration in the housing market and the broader economy”.</p>
<p>In effect this time round the Financial Stability Review reads a bit like a report card on the banking sector and in that context Aussie banks have been given a pat on the back for the efforts to ensure higher quality loan books. However there is no doubt there is a much more concerned tone from policymakers about the outlook. In effect the report highlighted potential future concerns and stressed that the right measures are put in play now to avoid instability. The key is to ensure that lending standards are not being compromised.</p>
<p>The RBA did provide a further warning to banks on the commercial property sector and even more so on international exposure – “especially housing and agricultural lending in New Zealand where the risks have continued to grow”. </p>
<p>Interestingly the last time policymakers provided a warning of this sort was on the Aussie dollar and the likelihood that it was overvalued and would fall at some point in the future – a result that has played out over the past year.</p>
<p>Encouragingly the Financial Stability Review highlighted the low levels of financial stress being faced by household. Confirming that “labour market conditions, which strongly influence the extent of household financial stress, have improved so far this year”. And importantly there is more comfort within the report with the RBA noting that 16 percent of borrowers are ahead in repayments by two years or more.  </p>
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<div class="column"><span style="line-height: 1.3em;">CommSec expects the Reserve Bank to remain on the interest rate sidelines. However the focus over the rest of this year is likely to be on the movements in the Australian dollar and the likelihood of further lifts in the mortgage rates by banks – adding to the downside risks to interest rates.</span></div>
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<span style="line-height: 1.3em;">According to the latest housing occupancy data, 61 percent of </span><span style="line-height: 1.3em;">households have at least one spare bedroom. The data </span><span style="line-height: 1.3em;">confirms recent trends showing that there is plenty of spare </span><span style="line-height: 1.3em;">capacity in our existing homes, even though we have been </span><span style="line-height: 1.3em;">utilising some of this extra capacity in the past five years. The</span><span style="line-height: 1.3em;"><br></span><span style="line-height: 1.3em;">latest figures have clear implications for the housing industry. If </span><span style="line-height: 1.3em;">Australians are keen to utilise their homes more efficiently then construction will be more constrained in coming years. </span>
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<p style="line-height: 1.3em;">What does the report say?</p>
<span style="line-height: 1.3em;"></span><span style="line-height: 1.3em;">On Australian Banks, the RBA noted</span><span style="line-height: 1.3em;">: “As noted, most banks have now strengthened the serviceability metrics used in their mortgage lending and taken steps to slow the pace of growth in investor lending towards APRA’s expectations. Banks also report that they are becoming increasingly wary of lending to property developers in markets that look oversupplied. The large banks have enhanced their resilience recently by raising substantial amounts of fresh capital in advance of new prudential requirements</span><span style="line-height: 1.3em;">.”</span>
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<br><span style="line-height: 1.3em;"> </span><span style="line-height: 1.3em;">On Australian businesses the RBA noted </span><span style="line-height: 1.3em;">“Outside the property sector, risks to the financial system from non- financial businesses remain low and the sector’s finances are generally in good shape. Business failure rates have fallen significantly across most industries and states over recent years and, in aggregate, are close to decade lows, although business failures have picked up a little in recent month”.</span>
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<br><span style="line-height: 1.3em;">On Australian households the RBA noted </span><span style="line-height: 1.3em;">“Many households have likewise been bolstering their resilience in a number of ways, including paying down their debt faster than contractually required and increasing their offset account balances.” .. “Aggregate mortgage buffers – as measured by balances in offset and redraw facilities – remain around 16 per cent of outstanding loan balances, equivalent to more than two years of scheduled”.</span>
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<br><span style="line-height: 1.3em;"></span><span style="line-height: 1.3em;">Further, the RBA noted </span><span style="line-height: 1.3em;">“Moreover, price competition for new and lower-risk owner-occupier borrowers remains strong, despite the forthcoming increase in the indicator rate announced by Westpac”.</span>
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<br><span style="line-height: 1.3em;"></span><span style="line-height: 1.3em;">On housing, the RBA said </span><span style="line-height: 1.3em;">“Large data resubmissions by several banks also indicate that the level of investor lending over recent years has been higher than had initially been reported. Over recent months, lenders have announced changes to a range of price and non-price lending terms and conditions to strengthen lending practices and respond to supervisory expectations (for details, see ‘The Australian Financial System’ chapter). Since then, there have been tentative signs that investor demand has started to cool..”</span>
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<br><span style="line-height: 1.3em;">On commercial property the RBA noted </span><span style="line-height: 1.3em;">“So far, the near-term risks to the domestic financial system from the commercial property sector appear modest, but they are rising. Although banks’ commercial property exposures declined as a share of their total assets after the financial crisis, growth in this type of lending has picked up in recent years, driven by the major Australian banks and by Asian-owned banks.”</span>
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<br><span style="line-height: 1.3em;">The RBA has provided special sections in the report dealing with Australia’s shadow banking system</span><span style="line-height: 1.3em;"><span style="line-height: 1.3em;">. At present “The shadow banking sector represents only around 5 percent of financial system assets in Australia. This share is down from over 10 percent in 2007 and well below that for a number of large economies”. “Because </span></span>of its small size and minimal credit and funding links to the regulated banking system, the shadow banking sector in Australia is judged to pose limited systemic risk. Nonetheless, the Reserve Bank and other Australian financial regulators continue to monitor shadow banking activity for signs of risk”.
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<p><span>Housing Occupancy &amp; costs </span></p>
<span style="line-height: 1.3em;">In 2007/08, the number of people, on average, in Australian homes lifted for the first time since records were first maintained in 1910. The number of people per home rose from 2.51 to 2.56; lifted further to 2.57 in 2009/10 and has lifted further to 2.59 in 2013/14. The number of people per home lifted to the highest levels in 14 years.</span>
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<br><span style="line-height: 1.3em;">The number of bedrooms per home hit a record high of 3.14 in 2013/14, up from 3.11 bedrooms in 2011/12.</span><br><p style="line-height: 1.3em;">Almost 61 percent of households indicated that they had one or more spare bedrooms in the 2013/14 survey, <span style="line-height: 1.3em;">down from 61.7 percent in the 2011/12 survey.</span></p>
<p style="line-height: 1.3em;">The proportion of households that owned their homes outright rose from 30.9 percent to 31.4 percent in 2013/14. Owners with a mortgage fell from 36.6 percent while renters lifted from 30.3 percent to a record high of 31.0 percent.</p>
<p style="line-height: 1.3em;">What is the importance of the economic data?</p>
<p style="line-height: 1.3em;">The Financial Stability Review is published by the Reserve Bank every six months. The report is basically a health check on the financial sector but it also assesses the state of household and business balance sheets.</p>
<p style="line-height: 1.3em;">The Bureau of Statistics releases estimates of Housing Occupancy &amp; Costs every two years. The data shows whether people are buying or renting and how efficiently people are utilising their homes.</p>
<p style="line-height: 1.3em;">What are the implications for interest rates and investors?</p>
<span style="line-height: 1.3em;">The Reserve Bank has highlighted an array of potential risks for the financial system and in essence given further credence of the need to maintain tighter bank lending standards. Overall the report suggests a slightly dovish tone to the broader economic landscape.</span>
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<div class="column">There is significant spare capacity in Aussie homes and there has been a greater willingness in recent years for younger people to share accommodation with others or stay longer in the family home. The trends in housing occupancy have clear implications for builders, developers and building material companies. If the trend to greater utilisation of homes continues then there will be less need to build more homes.</div>
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<br><span style="line-height: 1.3em;">CommSec expects interest rates to stay on hold over the next few months although the risks lie with another rate cut. </span>
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<div class="column"><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></div>
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RBA warning to banking sector: CommSec's Savanth Sebastian

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<p><span>GUEST OBSERVER</span></p>
<p><span>Westpac’s forecast for the headline CPI is 0.9 percent qtr which lifts the annual pace to 1.5 percent/yr from 1.0 percent/yr. </span></p>
<p><span>September is traditionally a stronger quarter (mostly due to the annual price resetting for administrated prices) with the ABS seasonal factor worth 0.3ppts. This results in the seasonally adjusted CPI rising a smaller 0.6 percent/qtr.</span></p>
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<p><span>Key to the solid rise is the strong price gains for food, housing (mostly via utilities) and recreation. Helping to hold the gains down in the quarter were falling prices for auto fuel, communication and clothing &amp; footwear. </span></p>
<p><span>Overall, traded prices are forecast to rise 0.9 percent, despite the 3.4 percent fall in auto fuel prices, which boosts the annual pace from 0.0 percent/yr to 0.6 percent/yr. Excluding fruit, vegetables, fuel and tobacco, traded goods prices are forecast to rise 0.3 percent/0.6 percent/yr in Q3 highlighting just how modest imported inflationary pressures are.</span></p>
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<p><span>Housing costs remain key to core and non-traded inflation. September quarter saw a significant jump in electricity bills lifting utility costs 5.7 percent/qtr. In 2015Q3 utility prices fell 0.5 percent. Other housing costs remain benign with rents falling in Perth, Darwin and Canberra while dwelling purchase prices have moderated in Sydney, Melbourne &amp; Brisbane while the declines are gathering pace in Perth.</span></p>
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<p><span>Core inflation (average) is forecast to print 0.4 percent/qtr (0.39 percent at two decimal places) which will see annual core inflation lift to 1.6 percent/yr from 1.5 percent/yr. The trimmed mean is forecast to rise 0.38 percent while the weighted median forecast is 0.40 percent. The six month annualised pace of the average of the core measures is forecast to lift to 1.7 percent/yr from 1.3 percent/yr in Q2 which remains a modest inflationary pulse.</span></p>
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<p><span>The pass through from the early weakness in the AUD did not provide the normal boost you would expect and so we doubt the recent appreciation of the currency will act as a further brake on prices. Outside of housing, where we are forecasting a modest gain following a statistical bounce in Q2, the risks to our forecast are balanced. </span></p>
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<p><span>A quick recap on the June quarter CPI </span></p>
<p><span>The headline CPI came in as expected rising 0.4 percent in Q2. The annual rate is now just 1.0 percent/yr compared to 1.3 percent/yr in Q1, which is the lowest rate of annual inflation since June 1999. </span></p>
<p><span>The core measures, which are seasonally adjusted and exclude extreme moves, rose 0.48 percent compared to the market’s expectation of 0.4 percent rise; Westpac was slightly lower at 0.35 percent. The annual pace of the average of the core inflation measures is now 1.5 percent, the lowest print we have yet seen for this measure. </span></p>
<p><span>The key observations from the June quarter CPI was some recovery in housing costs, a lift in health costs and some sign of AUD pass-through with a 2.0 percent lift in clothing &amp; footwear prices. Given the core print in Q2, and our expectations for Q3, we do think we have seen the low in the annual pace of core inflation. </span></p>
<p>Some solid ‘knowns’ but, as always, many ‘unknowns’!</p>
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<p><span>In the June quarter, while there was still no broad based acceleration in prices, there were some promising signs that we may have found a base in the disinflationary cycle. For the September quarter, we expect a number of one off positive factors will boost the headline measure well above the underlying momentum of core inflation.</span></p>
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<p><span>There is a known boost (partly seasonally) from fresh fruit &amp; vegetables plus the usual seasonal rise in utilities and domestic holiday travel. Partially offsetting these gains is a fall in automotive fuels, the seasonal fall in pharmaceuticals, domestic holidays and further declines in communication prices. </span></p>
<p><span>However, as always, a large number of unknowns remain. In particular, while we expect house purchase prices will return to a more modest pace than we saw through 2015Q4 and 2016Q1 we wonder if the 0.9 percent/qtr bump in Q2 the start of a new stronger trend. </span></p>
<p><span>We also don’t have access to a lot of the data the ABS uses and, in many cases, it is not possible to replicate the survey process the ABS uses causing many small errors along the way. We use many alternative sources and surveys as a guide but our forecasts are, in the end, subject to a significant amount of personal judgement. </span></p>
<p><span>Automotive fuels are a meaningful drag this quarter. </span></p>
<p><span>One of the most obvious events in the last few quarters has been the extreme volatility in the pump price of automotive fuels. Starting the quarter at $1.22/l the pump price then fell to a low of $1.10/l around mid-August before rallying to a high of $1.18/l at the end of the quarter. In terms of the quarterly averages, we forecast that the price of automotive fuels will fall around 3.4 percent contributing –0.12ppts to the CPI. Fuel is the most significant negative we have identified for the September quarter CPI. </span></p>
<p><span>Fruit &amp; vegetables set for strong bounce. </span></p>
<p><span>For the September quarter we forecast an 8 percent rise in vegetable prices plus a very robust 14 percent rise in fruit prices. All up, the 11.3 percent rise in fruit &amp; vegetable prices will add 0.33ppt to the CPI. </span></p>
<p><span>Running into the spring flush we are looking for softer meat &amp; seafood prices (–0.4 percent) but rising wholesale price late in the quarter means the decline is less than you would usually expect. We are also very aware of the ongoing price discounting in the very competitive groceries space and what appears to be a lack of pass through from the weaker AUD to imported foodstuffs. Our forecasts see food &amp; non-alcoholic beverages contribute 0.35ppt to the CPI. </span></p>
<p><span>Partial re-index of the tobacco excise. </span></p>
<p><span>Tobacco excise is re-indexed to the CPI in the month of September so we incorporate 1/3 of this increase in the September quarter average and the other 2/3 will appear the in December quarter. We are looking for the usual modest gains in alcoholic beverages but note we should be past the greatest pressure from the weaker AUD for imported beverages. </span></p>
<p><span>Seasonal rise for domestic holiday travel costs. </span></p>
<p><span>The BITRE (Bureau of Infrastructure, Transport &amp; Regional Economics) data on best price economy airfares is pointing to the usual seasonal bump for domestic airfares in Q3. So for the September quarter we are forecasting a 1% rise in domestic holiday costs, while the previous weaker AUD will help boost international holiday travel, at the margin (remembering that prices are applied to when the travel is taken not when it was booked). As such we are looking for a 2.6%qtr rise in holiday travel &amp; accommodation. </span></p>
<p><span>Dwelling prices to moderate from Q2 bump. </span></p>
<p><span>The June quarter saw a bump up in dwelling costs (0.9 percent/qtr on average, prices lifting by this much in Melbourne and Brisbane thus supporting the 1.5 percent bounce in Sydney). We are looking for </span>the gains to fall back to around their three quarter average for the cities (0.6 percent/qtr of Sydney and Melbourne, 0.4 percent in Brisbane, 0.3 percent in Adelaide while prices continue to fall in Perth) resulting in a modest 0.4%qtr the price of dwellings purchased.</p>
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<p><span>Housing overall makes a solid contribution of 0.31ppts. </span></p>
<p><span>Rents are expected to remain on a very benign path with a gain of just 0.2 percent. This follows a 0.2 percent in Q2, 0.1 percent in Q1 and a 0.2 percent in Q4. While rents are clearly under pressure in WA and easing in other capital cities, in aggregate they tend to be relatively sticky given the way they are measured in the CPI and so we would expect any downside risk to this forecast to be very modest.</span></p>
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<p><span>However, electricity prices surged in the September quarter and power companies adjusted prices in the face of rising wholesale prices. All up, electricity prices are expected to rise 8.4 percent. In total utilities are forecast to rise 5.7 percent as the usual Q3 price rising in other utilities is somewhat less than that for electricity. </span></p>
<p><span>Ex-housing, the CPI is forecast to rise 0.6 percent. </span></p>
<p><span>The impact of the AUD is shifting to appreciation without the earlier depreciation having any meaningful impact.<br></span></p>
<p><span>We also expect that we are nearing the end of the inflationary impact, if there has been much impact, of the earlier AUD depreciation. In Q2 and again in Q3 the AUD has strengthened a little. As such, we are making a very small allowance for a bit more pass-through in clothing &amp; footwear and household contents &amp; services. The September quarter normally experiences post-June sales discounting for clothing &amp; footwear and this year we expect the discounting to be a bit less usual. Westpac is forecasting a 0.1 percent fall in clothing and footwear and a 0.8 percent rise (0.07ppt) in household contents &amp; services. </span></p>
<p><span>The one area we do expect to see some pass-through from the weaker AUD is in car prices as the fall in the AUD against the Japanese Yen has been much greater than other currencies given the significant appreciation in the Yen to the US dollar. We are forecasting a 0.2% rise in car prices contributing 0.01ppt to the CPI. Car prices fell 1.4 percent in Q2 and our Q3 forecast is very modest compared to the 1.1 percent gain in 2015Q3. </span></p>
<p><span>Overall seasonality tends to be significant positive in Q3. </span></p>
<p><span>With seasonal re-pricing for administrated goods (ie. rates, utilities, public transport etc), the ABS reports Q3 with a seasonal positive. That is, our seasonally adjusted estimate is 0.3ppt weaker at 0.6% than our headline CPI forecast. There is a caveat however: the ABS conducts concurrent seasonal re-analysis and the revisions to the seasonal factors can be quite significant. </span></p>
<p><span>Core inflation to remain well below the bottom of the band. </span></p>
<p><span>Westpac is forecasting the average of the core measures to rise by 0.39 percent in Q3 with the annual pace lifting to 1.6 percent/yr from 1.5 percent/yr. Traded goods &amp; services are forecast to rise 0.9 percent/qtr with the annual pace accelerating to 0.6 percent/yr from 0.0 percent/yr; non-traded prices are also forecast to rise 0.9%qtr for an annual pace of 2.1 percent/yr from 1.6 percent/yr. The six month annualised pace of the average of the core measures is forecast to lift to 1.7 percent/yr from 1.3 percent/yr in Q2. </span></p>
<p><span>Risks balanced for headline. </span></p>
<p><span>We expect that the pass through from the earlier AUD weakness has all but passed and the fall in petrol prices more than offset by rising housing costs. But core inflation remains well contained. There may be some upside risk for housing, particularly if Sydney is on a new stronger trend, but we are cautious that traded goods in particular may be softer than what we are expecting. </span></p>
<p><span><em>Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.</em></span></p>
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June quarter saw a bump up in dwelling costs: Westpac's Justin Smirk

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<div class="column">GUEST OBSERVER</div>
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<br>We expect Q3 CPI data (on 26 October) to show that underlying inflation has remained weak. On our forecasts, the data are unlikely to be enough to provide confirmation that disinflationary forces are fading.</div>
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<div class="column">This would complicate the monetary policy outlook, although we don’t expect the RBA to mechanically respond to a low result.</div>
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<br><p>We expect the trimmed mean to have risen by 0.3 percent q/q and the weighted median by 0.4 percent q/q. This would see the average of the two measures rise by 0.4 percent q/q and be steady at 1.5 percent y/y.</p>
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<p>Importantly, the risks around this forecast seem tilted to the downside given still weak wage growth, low rental inflation, and ongoing pressure on a broad range of retail prices. A key uncertainty in the forecast is around new house prices. This is the largest item in the CPI at 9 percent of the basket and has been quite volatile over the past year.</p>
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<p>In our view, an outcome for the average of the two underlying measures of 0.3 percent q/q or less would concern the RBA given it would be below the implied RBA forecast and likely trigger a downgrade to the RBA’s inflation profile.</p>
<p>That said, the backdrop is quite different from April when the weak Q1 CPI print was released: the RBA has two rate cuts in the pipeline and recent communication has sounded comfortable about policy settings; the domestic economy looks more robust; commodity prices have risen; the property market has re-energised; and the changes to the statement on the conduct of monetary policy have increased the RBA’s ability to tolerate below-target inflation on financial stability grounds.</p>
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<p>Given this, the detail will be important in assessing any implications for monetary policy. There is little domestic monetary settings can do about global factors (notably competitive pressures weighing on tradable inflation), but the RBA would likely be concerned if there is broad-based weakness across non- tradable inflation.</p>
<p>Should the RBA be confronted with this scenario, we doubt there would be any urgency to respond. Indeed, in such a scenario, we would think it would be more appropriate for the risk of further easing in February to shift, rather than for November.</p>
<p> </p>
<p>Apart from the more robust backdrop, waiting until February would provide the RBA the opportunity to see one more GDP print (on 7 December), one more inflation print (in late January), another round of wages data, as well as a few more months of data on both the housing and labour markets. In addition, the US Federal Reserve is likely to have tightened by that time, which could have consequences for the AUD.</p>
<p>The headline CPI is forecast to have risen by 0.5 percent q/q in Q3, slightly higher than the 0.4 percent q/q Q2 outcome, leaving annual inflation steady at 1 percent y/y. Our daily tracking of petrol prices imply a 3.2 percent fall in the quarter.</p>
<p>THE BROAD THEME REMAINS ONE OF WEAK INFLATIONARY PRESSURES</p>
<p>Retail price inflation is being restrained by global competitive pressures. Meanwhile, weak wage growth – which is showing only tentative signs of stabilising – and low inflation expectations are weighing on non-tradable inflationary pressures1. New house prices are the key exception to this, with inflation in this sector likely to have remained relatively solid given the high level of construction activity.</p>
<p>Consequently, we expect inflationary pressures to remain relatively subdued across a broad range of items, with both tradable and non-tradable inflation expected to remain soft. Indeed, we continue to see a weak inflation environment over the coming year (see Figure 1). </p>
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<div class="column">Tradable inflation continues to be contained as domestic firms face intense global competitive pressures, which has curbed pricing power and limited the degree of currency pass through (see Figure 3).<br><p>These competitive pressures likely have several years to run across both consumer staples and durables. Indeed, we continue to see weak inflationary pressures across supermarket prices, clothing &amp; footwear, furnishings, and audio visual &amp; computing equipment.</p>
<p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%202.36.46%20PM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%202.36.46%20PM.png" alt=""></p>
<p>Meanwhile, weak wage pressure is likely to see market services inflation remain mild and continue to lean on administered inflation. Wage growth is showing tentative signs of bottoming, but any recovery is likely to be a slow process given a significant degree of underemployment. </p>
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<div class="column">The housing component is forecast to add 0.2ppt to headline CPI, reflecting a seasonal increases in utilities and property rates as well as a rise in new dwelling purchase prices.</div>
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<br>That said, there is a high degree of uncertainty around new house prices. This is the largest item in the CPI at 9 percent of the basket and has been quite volatile in the past year. Building approvals for houses have remained at elevated levels, but new house price inflation has weakened sharply on a y/y basis (see Figure 6). Given renewed strength in the housing market, we expect a reasonable rise of 0.7 percent q/q in Q3 (after 0.9% q/q in Q2 and 0.2% q/q in Q1).<br><p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%202.39.45%20PM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%202.39.45%20PM.png" alt=""></p>
<p>While we expect new house price inflation to continue to remain relatively strong in the coming quarters, upside pressure from this component is likely to fade over 2017-18 as construction activity peaks and then moderates. Indeed, investor finance for new construction has weakened in recent months and suggests building approvals may be close to a peak.</p>
<p><a href="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%202.41.35%20PM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/10/13/Screen%20Shot%202016-10-13%20at%202.41.35%20PM.png" alt=""></p>
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<p>Rental inflation (which accounts for 7 percent of the CPI basket) is forecast to remain very weak at +0.2 percent q/q, consistent with surging supply.</p>
<p>Given the supply of apartments coming on stream over the next year (Figure 7) and the investor-led nature of this property cycle, rental inflation is forecast to remain soft over the forecast period – a concern recently highlighted by the RBA. </p>
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<div class="column">Petrol prices have had a significant influence on headline CPI this year.</div>
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<div class="column">Our daily tracking suggests petrol prices fell by 3.2 percent in Q3, subtracting 0.1ppt from the headline CPI. We think global oil prices have found a base and forecast a slow upward trajectory from current levels, which will contribute to higher headline inflation in the quarters ahead.</div>
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<br>The communications category is forecast to subtract 0.1ppt from CPI in Q3, with prices forecast to have fallen by 1.8 percent q/q in Q3. Prices for telecommunication and equipment items have been falling since late 2013 and the downward pressure shows no sign of abating. </div>
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<p><span>Tobacco </span><span>prices are forecast to add to headline CPI in Q3, with the annual 12.5% excise increase on 1 September 2016 pushing tobacco prices higher. That said, we note that most of the impact of this administered price rise comes through in the December quarter. </span></p>
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<p><span>Holiday travel and accommodation </span><span>is forecast to contribute 0.1ppt to quarterly CPI, reflecting a seasonal increase in international travel, while BITRE data points to a jump in domestic airfares.</span></p>
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<p><em>Jo Masters is senior economist, ANZ and can be contacted <a href="https://www.anz.com/personal/" target="_blank">here</a>.</em></p>
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Expect new house price inflation to remain strong: ANZ's Jo Masters

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<p>GUEST OBSERVER</p>
<p>The Consumer Price Index – the main measure of inflation in Australia – rose by 0.4 percent in the June quarter, in line with expectations.</p>
<p>In seasonally adjusted terms the CPI rose by 0.6 percent. The annual rate of inflation fell from 1.3 percent to 1.0 percent – equalling the low set in June 1999. So inflation stands at a 17-year low. </p>
<p>The Reserve Bank monitors three measures to derive the underlying inflation rate. The trimmed mean rose by 0.5 percent in the June quarter (1.7 percent annual); the weighted median rose by 0.4 percent (1.3 percent annual) and the CPI less volatile items rose by 0.3 percent (1.6 percent annual). Overall, underlying inflation rose by 0.4 percent in the quarter and by 1.53 percent over the year – a record low.</p>
<p>Petrol prices rose by 5.9 percent in the quarter with medical and hospital services up by 4.2 percent, tobacco up by 2.1 percent and new dwelling purchase up 0.9 percent. The CPI was dragged lower by a 3.7 percent fall in domestic holiday costs, a 1.3 percent fall in car prices and 1.5 percent fall in telecom equipment and services.</p>
<p>Education fees rose 3.3 percent over the year – the slowest growth on record. A raft of goods fell at a record annual rate including breakfast cereals, wine, snacks &amp; confectionary and communication. </p>
<p><a href="/images/2016/07/28/Screen%20Shot%202016-07-28%20at%208.21.34%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/07/28/Screen%20Shot%202016-07-28%20at%208.21.34%20AM.png" alt=""></p>
<p>What does it all mean?</p>
<p> Price pressures are contained. Clearly this is not a new development and certainly not one confined to Australia. Consumers can buy goods anywhere and anytime with internet purchases transforming businesses across the globe. Competition is keeping downward pressure on prices and margins and causing businesses to look first at cutting costs before opting to lift prices. And disruption is adding to the competitive forces – developments like Airbnb and Uber are challenging mainstream industries and businesses.</p>
<p>Inflation is stubbornly below the Reserve Bank’s 2-3 percent target band. And importantly it is unlikely the Bank will look to revise the target any time soon. The only way that the Reserve Bank can seek to lift the inflation rate to the target band is by running the economy at a faster rate and that means cutting interest rates. So a rate cut will be on the agenda at the Reserve Bank Board meeting next Tuesday.</p>
<p>Will a rate cut actually boost growth? It is far from certain, but the Reserve Bank has to try. But the Reserve Bank won’t continue to cut rates if it’s clear that interest rates at super-low levels have become ineffective in boosting demand.</p>
<p>Before today’s data the Reserve Bank had assumed an annual headline CPI result near 1 percent in the June quarter with the underlying rate at 1.5 percent. Those forecasts have been realised. But the Reserve Bank had tipped inflation to stay locked between 1.5-2.5 percent over the next two years. So even before the latest data the Reserve Bank held open the possibility of a rate cut with inflation expected to remain at or below the bottom end of its 2-3 percent target range.</p>
<p> Low inflation isn’t confined to certain parts of the economy – it is very much an economy-wide phenomenon. In fact the core measure of market-determined services (excludes volatile items) actually fell by 0.2 percent in the quarter. It’s not just goods but also services that are getting cheaper. Consumers are kings and queens in the current environment.</p>
<p><a href="/images/2016/07/28/Screen%20Shot%202016-07-28%20at%208.22.36%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/07/28/Screen%20Shot%202016-07-28%20at%208.22.36%20AM.png" alt=""> </p>
<p>What do the figures show?</p>
<p>Consumer Price Index</p>
<p>The All Groups Consumer Price Index (CPI) rose by 0.4 percent in the June quarter, broadly in line with expectations. In seasonally adjusted terms the CPI rose by 0.6 percent. The annual rate of inflation fell from 1.3 percent to 1.0 percent – equalling the low set in June 1999. So inflation stands at a 17-year low.</p>
<p>Underlying measures of inflation were generally in line with forecasts in the June quarter. The trimmed mean rose by 0.5 percent in the June quarter (1.7 percent annual); the weighted median rose by 0.4 percent (1.3 percent annual) and the CPI less volatile items rose by 0.3 percent (1.6 percent annual). Overall, underlying inflation rose by 0.4 percent in the quarter and by 1.53 percent over the year – a record low.</p>
<p>The Bureau of Statistics noted: “The most significant price rises this quarter are medical and hospital services (+4.2 percent), automotive fuel (+5.9 percent), tobacco (+2.1 percent) and new dwelling purchase by owner- occupiers (+0.9 percent). The most significant offsetting price falls this quarter are domestic holiday travel and accommodation (-3.7 percent), motor vehicles (-1.3 percent) and telecommunication equipment and services (- 1.5 percent).”</p>
<p>Prices of tradables rose by 0.6 percent in the June quarter with higher petrol prices offsetting low car prices. The tradables component of consumer prices was unchanged in the year to June.</p>
<p>Prices of non-tradables rose by 0.4 percent in the June quarter. Price increases were recorded for new dwelling purchase and hospital and medical services. The most significant offsetting fall was for domestic holiday travel and accommodation. Non-tradables prices rose by 1.6 percent in the year to June. Tradable goods are those items whose prices are largely determined on the world market. Non-tradable prices are more affected by domestic economic conditions.</p>
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<p><span>Why is the data important? </span></p>
The Consumer Price Index (CPI) is regarded as Australia’s premier measure of inflation. The CPI is published quarterly and measures price changes for a ‘basket’ of goods and services that dominate expenditure of metropolitan households. The “All Groups” index is the main focus, but other inflation measures are also published such as so-called ‘underlying’ measures. These include measures that abstract from price changes in volatile price items such as fresh food and petrol.<br><p>The Reserve Bank aims to keep the headline inflation rate between 2-3 percent over an economic cycle. If inflation is high and expected to rise, the Reserve Bank may elect to raise interest rates in order to constrain price pressures. Conversely, if inflation is low and expected to remain low, the Reserve Bank may elect to cut interest rates if it believes the growth pace of the economy is in need of strengthening.</p>
<p>What are the implications?</p>
<p>CommSec expects the Reserve Bank to cut the cash rate next week by 25 basis points or a quarter of a percent to 1.75 percent.</p>
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At the Reserve Bank website, four measures of inflation are represented – the headline rate of inflation and three underlying measures. All four are important. The headline inflation rate is at 17-year lows. The average underlying rate is 1.53 percent – the lowest result in data extending back to 1983. It is clear that little stands in the way of the Reserve Bank cutting rates again.</div>
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<div class="column">There are no inflationary pressures. Businesses will need to continue to look at cost and productivity savings to keep prices low or drive prices even lower. </div>
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<p> <em>Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.</em></p>
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Little in the way of the Reserve Bank cutting rates again: CommSec's Craig James

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<p>GUEST OBSERVER</p>
<p>The Q2 CPI printed 0.4percent compared to Westpac’s forecast for 0.5 percent. The market median was 0.4 percent. The annual rate is now just 1.0 percentyr compared to 1.3 percentyr in Q1 which is the lowest rate of annual inflation since June 1999.</p>
<p>The core measures, which are seasonally adjusted and exclude extreme moves, rose 0.48 percent compared to the market’s expectation of 0.4 percent rise. Westpac’s forecast was lower at 0.35 percent. In the quarter, the trimmed mean gained 0.51 percent while the weighted median lifted 0.44percent. The annual pace of the average of the core inflation measures is now 1.5 percent from 1.5 percent in Q1 (Q1 was revised from 1.4 percentyr).</p>
<p>The six month annualised pace of core inflation came in well below the band at a very 1.3 percentyr pace, this is the fourth quarter in a row it has been below the bottom of the target band and the lowest six month annualised pace since the 1.3 percenty print in March 1999 (a seventeen year low).</p>
<p>Click to enlarge</p>
<p><img src="/images/2016/07/27/Screen%20Shot%202016-07-27%20at%201.57.09%20PM.png" alt=""></p>
<p>Helping to hold the core measures down, but not pushing the pace even lower, was the modest 0.4 percent rise in housing cost which is a small lift from the 0.3 percent in Q1. Rents held a very subdued rise of just 0.2 percent (from 0.1 percent in Q1) but of more interest was the 0.9 percent bounce in house purchases from the very mild 0.2 percent in the March quarter. In the quarter dwelling prices rebounded in Sydney (1.5 percent from 0.5 percent in Q1), Melbourne and Brisbane (both 0.9percent from 0.4percent) easing fears that we may be seeing a significant slowdown in housing costs which would pin down both core and non-traded inflation.</p>
<p>Non-traded prices rose 0.4 percent in Q2 as a boost to health costs (2.6percentqtr) added to the lift from housing costs. </p>
<p>Traded goods prices rose 0.6 percentqtr following a very weak –1.4percent in Q1. The June quarter saw something of a reversal for the auto fuel prices (+5.9 percentqtr vs –10percent in Q1) and fresh fruit &amp; vegetables (1.7percent vs –4.3 percent in Q1). However, excluding fuel, food and tobacco traded goods rose a modest 0.3 percentqtr which is only a modest bounce from the 1.3 percent decline in Q1. This left this ‘core’ measure of traded goods prices at a very modest 0.3percentyr.</p>
<p>Our March quarter observation about across the board weakness in Australia retail prices was modestly reversed in the June quarter with some recovery housing costs, a lift in health costs and some sign of AUD pass-through with 2.0 percent lift in clothing &amp; footwear prices. As such, it does provides at least some near term relief from fears that the outlook for inflation could be significantly lower than what the RBA is currently expecting. </p>
<p>It does not, however, remove those fears as falling food prices (ex-fresh fruit &amp; vegetables), recreational goods and car prices highlight that the pressure on margins remain. </p>
<p><strong>Outlook for the RBA – Bill Evans, Chief Economist. </strong></p>
<p>The underlying measure of the inflation printed 0.48percent to two decimal places. That was above our forecast of 0.4percent. Annual underlying inflation held steady at 1.5percent – outside the 2-3 percent target range.</p>
<p>We pointed out in our note last week that the risk in the number was in the “house purchase” or “construction costs” that printed 0.9percent compared to our expectation of 0.3percent. However the other housing component that captures the housing effect – rents remained subdued at our forecast number of 0.2percent.</p>
<p>The RBA sees the disinflationary “forces” coming from weak wages growth; tight retail margins; and slowing housing costs while it is less convinced about the “pass through” effect of the fall in the AUD.</p>
<p>Evidence of sagging wages growth and disinflationary global pressures provide little evidence that “something will turn up” to reverse this ongoing “below target zone” performance.</p>
<p>The retail margin squeeze was apparent with food; household goods; and cars, although not in clothing and footwear. The housing slowdown eased in the quarter.</p>
<p>Recall that the RBA’s own forecast for underlying inflation for the year to June quarter was 1.5 percent – so this number will be in line with their forecasts.</p>
<p>Also recall that the RBA forecast for underlying inflation in 2016 is 1.5 percent and 2.0 percent in 2017.</p>
<p>That forecast, in May, used “market pricing” which at the time incorporated a further full rate cut by year’s end.</p>
<p>We can only assume that the Bank  will continue to accept that another rate cut , some -time in 2016, will be necessary to achieve these “barely acceptable.” forecasts in the context of a Bank that targets a 2-3 percent inflation “zone”.</p>
<p>Another way to look at this number is that at 0.48percent still “annualises” to a “below target range” number. Of course, the 6 month annualised number is running at 1.3percentyr.</p>
<p>In our view this report is still consistent with a rate cut of 0.25 percent next week.</p>
<p>However because there was some “bounce back” in the number the case can be made to wait if there is a fundamental philosophical resistance to cutting.</p>
<p>Evidence of that “resistance” softened in the recent Board minutes where the Board appeared to be more cautious around both the labour market and the housing market.</p>
<p>With the market expecting a rate cut and most commentators supporting that position the best policy still appears to be another cut.</p>
<p><span><em>BILL EVANS</em></span><em> is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>. <em>Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a>.</em></em></p>
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Rate cut of 0.25 percent possible: Bill Evans, Justin Smirk

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<p>GUEST OBSERVER</p>
<p>The weekly ANZ/Roy Morgan consumer confidence rating was unchanged at 113.9 <span style="line-height: 1.3em;">in the week to May 8. Confidence is up 3 percent over the year and above the average of 112.1 since 2014.</span></p>
<p>Just one of the five components of the index rose in the latest week.</p>
<p>Chinese inflation: Chinese consumer prices fell by 0.2 percent in April to be up 2.3 percent on the year. <span style="line-height: 1.3em;">(forecast 2.3 percent). Producer prices fell by 3.4 percent over the year (forecast -3.7 percent).</span></p>
<p><span style="line-height: 1.3em;">Click to enlarge</span></p>
<p><span style="line-height: 1.3em;"><img src="/images/2016/05/10/Screen%20Shot%202016-05-10%20at%204.16.00%20PM.png" alt=""></span></p>
<p>Food inflation: Over the year food prices are up 7.4 percent with non-food prices up just 1.1 percent.</p>
<p>The consumer confidence figures have implications for finance providers, retailers, and companies dependent on consumer and <span style="line-height: 1.3em;">business spending. Chinese economic data is especially of importance to exporters and importers.</span></p>
<p>What does it all mean?</p>
<p>The latest consumer confidence reading is quiet timely, providing the first perspective off how households have <span style="line-height: 1.3em;">responded not just to the Federal budget but also the Reserve Bank interest rate cut. And in that context, if the </span><span style="line-height: 1.3em;">Reserve Bank had been hoping for an immediate boost to confidence following the rate cut policymakers would </span><span style="line-height: 1.3em;">be sadly disappointed – particularly in light of most of the major banks passing on the full rate cut to mortgage </span><span style="line-height: 1.3em;">holders. Confidence was essentially flat in the past week.</span></p>
<p>The Federal budget would not have had a major impact on confidence. However it may be that the slide in the <span style="line-height: 1.3em;">Aussie dollar negated the interest rate cut from the perspective of Aussie households. Over the past week the </span><span style="line-height: 1.3em;">Australian dollar has fallen by over US4 cents. Overall a lower Australian dollar is great news not just for export </span><span style="line-height: 1.3em;">orientated businesses but also the broader economy. However Aussie households tend to view a lower Australian </span><span style="line-height: 1.3em;">dollar as a negative, making overseas travel and overseas online purchases more expensive.</span></p>
<p>The Chinese inflation data highlights the issues facing central banks across the globe. Chinese consumer prices <span style="line-height: 1.3em;">fell in April and are up just 2.3 percent over the year. Deflation seems to be a more prevalent threat to a number </span><span style="line-height: 1.3em;">of international economies. No doubt the weakness in commodity prices is feeding through to the weaker inflation </span><span style="line-height: 1.3em;">results. In addition a weaker growth profile for the global economy is keeping price pressures under check.</span></p>
<p>China is Australia’s largest trading partner by a large margin. And China is attempting to rebalance activity away <span style="line-height: 1.3em;">from construction, manufacturing and mining to service sectors like retailing, financial services, hotels and food </span><span style="line-height: 1.3em;">services. And that rebalancing will continue to come with mixed results. Chinese authorities have scope to ease </span><span style="line-height: 1.3em;">policy further if they deem it necessary.</span></p>
<p>What do the figures show?</p>
<p>Consumer confidence</p>
<p>The weekly ANZ/Roy Morgan consumer confidence rating was unchanged in the past week at 113.9 in the <span style="line-height: 1.3em;">week to May 8. Confidence is up 3 percent over the year and above the average of 112.1 since 2014. Just one of </span><span style="line-height: 1.3em;">the five components of the index rose in the latest week:</span></p>
<p>The estimate of family finances compared with a year ago was down from +6 to +5;</p>
<p>The estimate of family finances over the next year was down from +27 to +26;</p>
<p>Economic conditions over the next 12 months was down from -2 to -3;</p>
<p>Economic conditions over the next 5 years was unchanged at  +7;</p>
<p>The measure of whether it was a good time to buy a major household item was up  from +32 points to +34 <span style="line-height: 1.3em;">points.</span></p>
<p>Chinese inflation:</p>
<p>Consumer prices fell by 0.2 percent in April to be up 2.3 per cent on the year. The annual result in line with <span style="line-height: 1.3em;">forecasts.</span></p>
<p>Non-food prices  rose by 0.1 percent in the month to be up 1.1 per cent over the year. Prices of consumer goods <span style="line-height: 1.3em;">rose 2.5 percent over the year (March 2.5 percent) with services up 2 percent (March 1.9 percent).</span></p>
<p>Food prices  fell by 1.4 percent in April after sliding by 1.8 percent in March. Food prices are up 7.4 percent <span style="line-height: 1.3em;">over the year, down from the 7.6 percent annual gain in March. Pork prices rose by 3.2 percent after falling by </span><span style="line-height: 1.3em;">1.3 percent in March. Pork prices are up 33.5 percent in the year to April, up from the 28.4 percent annual </span><span style="line-height: 1.3em;">increase to March.</span></p>
<p>Consumer good categories (year to April): Food, tobacco and alcohol 5.9 percent; Clothing 1.5 percent; <span style="line-height: 1.3em;">Rent, fuel &amp; utilities 1.4 percent; Household goods 0.5 per cent; Transport and communication -2.4 percent; </span><span style="line-height: 1.3em;">Education, culture and recreation 1.2 percent ; Healthcare 3.2 percent; Other goods and services 1.7 percent.</span></p>
<p>Producer prices fell by 3.4 percent in the year to April, firmer than the 4.3 percent decline to March and ahead <span style="line-height: 1.3em;">of the market forecasts centred on a 3.7 percent decline. It was the smallest rate of decline since January 2015.</span></p>
<p>What is the importance of the economic data?</p>
<p>China’s National Bureau of Statistics  releases its monthly economic statistics around mid-month. Quarterly <span style="line-height: 1.3em;">GDP data is released around the 19th of January, April, July and October. China’s Customs Office releases trade </span><span style="line-height: 1.3em;">data, and the People’s Bank of China releases financial statistics, around the 10</span><span style="line-height: 1.3em;">th </span><span style="line-height: 1.3em;"> of each month. China is </span><span style="line-height: 1.3em;">Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie </span><span style="line-height: 1.3em;">economy</span></p>
<p>The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne <span style="line-height: 1.3em;">Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is </span><span style="line-height: 1.3em;">now closely tracked by the Reserve Bank.</span></p>
<p>What are the implications for interest rates and investors?</p>
<p>From a household balance sheet perspective the outlook for <span style="line-height: 1.3em;">retailers looks healthy. Lower petrol prices, firm confidence </span><span style="line-height: 1.3em;">levels, solid home construction and healthy employment should </span><span style="line-height: 1.3em;">all serve to boost spending levels. However the uncertainty over </span><span style="line-height: 1.3em;">the timing of an early Federal election will weigh on activity over </span><span style="line-height: 1.3em;">the short term.</span></p>
<p>The Reserve Bank will closely monitor developments in China <span style="line-height: 1.3em;">and financial markets more generally.</span></p>
<p><span style="line-height: 1.3em;"><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></span></p>
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Rate cut fails to lift confidence, China deflation: CommSec's Savanth Sebastian

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<p><span style="line-height: 1.3em;">The housing component of the Consumer Price Index, increased 1.7 percent over the 12 months to March 2016, the lowest annual increase since December 1998 according to the latest Property Pulse by CoreLogic RP Data.</span></p>
<p><span style="line-height: 1.3em;">Housing is the largest component of overall CPI however only counts owner occupier purchases of new dwellings.</span></p>
<p>Following the ABS releasing consumer price index (CPI) data for the March 2016 quarter earlier this week, inflation was recorded at -0.2 percent over the March 2016 quarter - the largest quarterly fall in inflation since December 2008 according to the report.</p>
<p>"Over the past year, inflation was recorded at 1.3 percent, its lowest annual reading in 12 months and well below the Reserve Bank’s (RBA) target range of 2 percent to 3 percent per annum," the report said.</p>
<p>"The inflation reading was dragged lower by large drops in the price of automotive fuel (-10 percent) and fruit prices (- 11.1 percent). The RBA likes to look at measures of underlying inflation, the trimmed mean and weighted median, which over the quar ter were recorded at 0.2 percent and 0.1 percent respectively.</p>
<p>"Over the past 12 months, the trimmed mean increased by 1.7 percent and the weighted median rose 1.4 percent. The annual change in the trimmed mean is at its lowest level since March 1999 and the annual change in the weighted median is at its lowest level on record (since March 1983). The very low inflation reading means that the RBA now has more than enough scope to cut official interest rates if required."</p>
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