Inflation May Have Already Peaked In Australia

For us, the inflation numbers are better than expected and not as disastrous as other developed economies. 

What we’re looking at is the trimmed mean, which shows a 4.9% increase in the most recent quarter compared to the same quarter last year. In the overall context, that’s not bad. 

The RBA will be encouraged and we suspect they might think twice about more aggressive rate cuts. 

The Aussie dollar was down and continues to struggle to rise above US$0.65 level, suggesting that Australian rates are probably going to rise slower than those in the US. A weak dollar is a blessing to our exporters. 

A few more months of similar numbers and we might see interest rate assumptions ease in 2023. The RBA is after all assuming a 4% inflation rate in 2023, so we’re not too far away from that number when using the 4.9% quarterly prior corresponding period comparison vs the previous quarter. 

Bottom line: Some good news that shows the Australian economy remains strong while monetary policy does its thing. 

This week’s better than expected budget numbers are also good news in that they highlight some fiscal tightening, which is perfectly timed. 

Australia is not immune from the world’s problems, but it is dealing with them much better, particularly compared to economies like the UK which look to be in a complete mess. 

Market commentary and insights from Peter Esho, co-founder at Wealthi.

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