00:01This is the June quarter data.
00:04So in Australia, we have this new monthly consumer price index figure.
00:08So we already have the April and the May figures, and this is sort of the full release.
00:13We have a much better long-term history of the quarterly figures, which is why the Reserve
00:19Bank is really paying attention more to the quarterly data rather than the monthly data.
00:23The monthly figures tend to be quite volatile.
00:26We haven't quite figured out some of the seasonal patterns that happen, and seasonality is really
00:30important in inflation figures because if you think of something like accommodation or
00:35travel or your utilities prices, they normally tend to increase in specific months every
00:40single year.
00:41So that's why we really pay attention to the quarterly data.
00:44The number that I'm focusing on today is the trimmed mean, which is basically Australia's
00:49core inflation.
00:50We think that over the June quarter, that's going to be up by about 0.9%.
00:55And over the year, that means 3.7% in core inflation.
00:59And that's just way too high.
01:01In Australia, we target inflation at 2.5% per year.
01:04Yeah.
01:05So as you say, the RBA watching closely, it's the last release before their next decision
01:09on rates.
01:09What sort of figure do you think would actually put the pressure on them to hike rates?
01:16Well, in their latest round of forecasts, they are basically assuming the same numbers that
01:22I am.
01:23So 3.7% or 3.8% annual growth in that trimmed mean number.
01:28But those forecasts are also assuming that we get another rate rise down the track because
01:34the way that the RBA does its forecast is it basically uses the forward-looking market
01:38pricing when it sets up those forecasts.
01:42So even if we get a number that's in line with what the Reserve Bank is thinking, so
01:47something like 3.7% year-on-year or 0.9% on the trimmed mean over the quarter, I
01:53think
01:53that we still get another rate rise in August.
01:56Yeah, interesting.
01:58And I mean, the government is yet to decide on whether it's going to extend that discount
02:02on the fuel excise come August.
02:04We know that fuel prices are, of course, going up.
02:06How will that decision, either way that they go on that, impact the economy and what we
02:12see with inflation numbers, RBA decisions?
02:15Yeah, it's interesting that fuel prices in Australia are actually lower now than where
02:20they were before the conflict because we've had these cuts to the fuel excise.
02:23I mean, not necessarily for diesel, but for petrol.
02:27I mean, I think if we don't see signs of a more tangible deal between the US and Iran coming
02:34in the next few weeks, which I think doesn't look likely, the government's probably going
02:38to extend that fuel excise rebate, or at least part of that rebate, perhaps, into September.
02:45It does cost them a decent amount of money to extend it, doesn't it?
02:49It's not very cheap at all, but it's clearly working to shield consumers from elevated prices.
02:55We haven't actually seen much of a negative here to consumer spending from these increased
03:00fuel prices.
03:00Actually, consumers have been quite resilient.
03:03I mean, what we really worry about is if fuel prices rise significantly, then the cost
03:08of your essentials go up.
03:09So consumers have to cut back on discretionary items, and businesses have higher essential
03:14spending, and they might have to pass on higher costs to consumers.
03:17Then you get down this path of unwanted inflation.
03:20The RBA can more or less take out the impacts of one-off rises to petrol prices, because it
03:27might not be sustainable.
03:28But what we worry about when petrol prices increase is that it gets into not just filling up your
03:34car prices, but it gets into everything else.
03:36It gets into food inflation, and it gets into parts where businesses are passing on costs,
03:41so things like eating out.
03:43And that's what we really want to avoid.
03:44That's what the RBA doesn't want to see.
03:45And, Diana, we've had Treasury warning about the impact of the ongoing war in the Middle
03:49East.
03:50How is that impacting consumer confidence, for example, forecasts moving forward?
03:55Yeah.
03:56Consumer confidence is terrible.
03:58Consumers are telling us that they feel depressed.
04:00The confidence numbers are actually around recessionary-like levels.
04:03But they have been there for some time, and we did see a bit of an improvement.
04:08But the broad cost of living challenge is still a concern for consumers.
04:13It's not just fuel.
04:14It's overall elevated inflation.
04:16I mean, given that the trim mean inflation is running at, you know, over 3.5% in the past
04:21year, and we should be at 2.5%.
04:23Consumers are feeling this in their everyday spending, in their groceries, in their medical
04:27bills, in the cost of schools.
04:28And interest rates have also risen this year, which never makes consumers with a mortgage
04:33feel good, even though it does benefit the savers.
04:36So, it's the broader cost of living challenge that is worrying consumers.
04:39And this is despite the fact that wages growth is actually pretty strong in Australia.
04:43And a lot of the inflation that we've had recently has been offset with some decent increases
04:49to wages lately, in the past 12 months.
04:51So, I think it's just broadly consumers are seeing these price rises out there.
04:55They see the big sticker fuel price when they drive past a petrol station, and it doesn't
05:00feel good.
05:00And, of course, conflict around the world doesn't feel good either.
05:03It disrupts travel plans, and it makes people feel uneasy about the future, which is why
05:08the confidence numbers are so weak.
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