The first monthly indicator on inflation from the Australian Bureau of Statistics (ABS) will be issued Thursday at 11.30am.
That’s a welcome addition to our knowledge of what’s happening in the economy, compared with the quarterly data we get now. Policymakers will have a better basis to make decisions, confident they have a near real-time handle on the state of inflation, just as we do on unemployment.
Good one, ABS.
Or… maybe the headless chickens in the media and financial markets, the “rate rise looms” columnists and inflation hawks at the AFR and academia, will simply have the chance to froth at the mouth three times a quarter instead of the now traditional quarterly eruption. There’ll be more statistical noise, more froth and bubble, more chin-stroking and media hysterics, without much in the way of quality.
The ABS will release the monthly inflation data for July and August on Thursday. In a trial of the monthly indicator released several weeks ago, inflation was running at an annual 6.8% in June (compared with the June quarter annual rate of 6.1%). Economists expect the indicators for July and then August will show inflation rose 7.8% and 7.1% in annual terms.
That will delight the inflation hawks, who will demand more punitive rate rises for households, which they believe have had it too good for too long.
But the new monthly indicator is only a partial one. It will cover, according to the ABS paper released in August, “updated prices for between 62% and 73% of the weight of the quarterly CPI [Consumer Price Index] basket”. The actual monthly component will only amount to 43% of the basket of goods and services used for the CPI. The rest will come from “quarterly and annual price collections”.
The monthly series will also be much more volatile due to seasonal factors like school holidays. The ABS recommends only comparing monthly figures with the corresponding month of the previous year, or three months prior, until it develops a seasonal adjustment for the monthly figure.
This is not to criticise the ABS. Some people have been complaining about the lack of monthly CPI for years. But we know most commentators won’t bother to tell their readers and audiences the caveats that attach to the data, or why it should be treated with caution — especially when it serves whatever argument they want to advance.
That’s especially true of the doomsayers and hawks who want the Reserve Bank to accelerate, not ease off, its interest rate hikes, and who’ll seize on any piece of data they can to justify it (for example, insisting that rate rises in the US, Europe or the UK “put pressure on the RBA” to lift rates). Monthly data will amount to a lot more heat, and very little light, from the obsessives who want households and workers punished for supply chain problems, Putin’s war, and big corporations using the cover of inflation to increase profits.
It will also disguise the fact that, with lower inflation, surging exports, a current account surplus, a smaller budget deficit and low unemployment, the Australian economy is far better placed than most other developed economies to withstand what increasingly looks like a major global slowdown in 2023. That doesn’t fit anyone’s narrative at the moment.
