Households and the Reserve Bank will get a much closer look into when soaring inflation peaks later this year as the official statistics body prepares to move towards more frequent price reports.
In a move welcomed by experts, industry and the government on Wednesday, the Australian Bureau of Statistics unveiled plans to publish monthly inflation data from October.
Currently, inflation figures are only published quarterly, meaning the Reserve Bank must often rely on data that’s several months old when deciding how to move interest rates each month.
The monthly reports will provide a timelier guide to how inflation is changing, said Australian Statistician David Gruen, with an initial release containing figures to June 2022 due next week.
“The information paper will show how the monthly CPI Indicator can provide an earlier guide to inflation developments, particularly in times of significant change,” Dr Gruen said in a statement.
The decision comes just weeks after quarterly figures showed inflation running at the fastest pace in two decades.
It has hit 6.1 per cent annually and is even expected to continue rising, which has prompted the RBA to pass through several painful rate hikes.
Experts said monthly inflation data will make it easier for the RBA and households to track when inflation peaks and begins to ease, which will be particularly useful for setting interest rates.
“This will give the RBA a much greater insight into how inflation is changing, particularly around the peak of inflation and when it starts to ease,” Indeed APAC economist Callam Pickering said.
“When it comes to setting monetary policy, more information is always better, particularly when it’s timely.”
Odd one out
Australia is one of few developed economies where inflation data isn’t already published on a monthly basis by an official statistics body.
Central banks in the US, Europe and Japan all have more timely price data at their disposal when making decisions about interest rates than the Reserve Bank of Australia currently has.
And that makes it more difficult to determine how high interest rates should rise to curb inflation without triggering an economic downturn, something RBA governor Philip Lowe has conceded is already a “narrow path” to walk.
KPMG senior economist Sarah Hunter said understanding how inflation is evolving, particularly how wage increases feed into prices and “the degree of passthrough from international markets” is key for the RBA.
“Having access to more timely, frequent data will enable the Board to identify shifts/turning points sooner than they otherwise would, and calibrate monetary policy accordingly,” Dr Hunter said.
“All other things equal, this should make it easier for the Board to walk the ‘narrow path’ Governor Lowe has outlined previously.”
UNSW Professor Richard Holden said more timely data will make it easier for the RBA to work out how high to raise rates and how fast.
“It doesn’t mean it’s going to be easy but it will help,” he said.
“More feedback [on the economy] faster is helpful.”
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Welcome move
The Albanese government welcomed the move to monthly inflation reports on Wednesday.
“Right now, Australia measures inflation every three months. Every other G20 country measures it monthly,” said Assistant Minister for Treasury Andrew Leigh.
“I’m pleased that they’ll be producing a new monthly CPI indicator.”
Accountants body CPA Australia also welcomed the announcement, saying governments and businesses have been relying on “out-of-date inflation data”.
“Quarterly CPI reporting puts Australian governments, regulators and businesses at a distinct disadvantage, especially in economically uncertain times like now,” said CPA Australia general manager Jane Rennie.
“Access to a monthly CPI indicator will close the information gap and help organisations make better financial decisions.”
