Australian inflation data for Q1 2023 (January to March quarter) is due on Wednesday #26 April at 11.30am Sydney time

  • 0130 GMT
  • 9.30 pm US Eastern time
Australia January march 2023 Q1 CPI 24 April 2023

CBA are looking for headline CPI to come in at 1.3% q/q and for the trimmed mean (core) measure to come in at 1.4% q/q:

  • We expect the March quarter CPI to confirm that annual inflation peaked in the December quarter last year.
  • The monthly CPI indicator suggests goods disinflation is occurring in Australia, as it is elsewhere. Services inflation is expected to be a key driver of the increase in prices.
  • Other timely measures of price pressures, such as the PMIs and from the NAB business survey also point to a softening inflation impulse.
  • Negative real household disposable income growth and negative wealth effects are weighing on consumer demand as the impact of the RBA’s 350 bps of hikes is flowing through the economy.

CBA outline their expected implications for the RBA. The next policy meeting is May 2:

  • We estimate the RBA’s implied quarterly profile for Q1 23 to be 1.6%/qtr for headline CPI and 1.4%/qtr for the trimmed mean. As such, we forecast headline inflation to be lower than the RBA’s forecast, but core inflation to print in line with the RBA’s expectations. The core number is more important from a monetary policy perspective.
  • The RBA has a hiking bias. And the RBA April Board Minutes noted that “the forecasts produced by the (RBA) staff in February had inflation returning to the target range only by mid-2025 and that it would be inconsistent with the Board’s mandate for it to tolerate a slower return to target. These forecasts were conditioned on monetary policy being tightened a little further.” As such we think that if Q1 23 underlying inflation is in line with the RBA’s forecasts a 25bp rate hike at the May Board meeting is more likely than not, particularly given the labour market remains very tight.
  • A core print slightly stronger than the RBA’s implied profile will leave us with reasonably high conviction that the RBA will hike the cash rate in May.
  • And a trimmed mean outcome of more than 1.6%/qtr would almost guarantee a rate increase at the May Board meeting.