A robust 0.8%qtr rise likely in Austarlia's September headline CPI

This quarter in Australia, stronger food prices, particularly fresh fruit & vegetables, are adding to the pulse from the re-indexing of the tobacco excise and the ongoing gains in dwelling purchase costs.

The decline in electricity prices is providing a modest offset as is the fall in the pump price of auto fuel. However, both together are more than offset by a forecast 4.5% rise in holiday travel costs.

"Core inflation is forecast to hold around the mid-point of the RBA's inflation target band, while the six month annualised pace is expected to fall to the bottom of the band. Traded prices are expected to see some lift from the weaker AUD, but given very robust competition in the retail space, any increases will be modest", says Westpac. 

At just 0.2%yr, while they are no longer disinflationary traded goods and services are yet to turn into a significant inflationary pulse due to the deprecation of the AUD.

For the last few quarters there was divergence between Australian automotive fuel prices and the AUD price of crude oil and how this was due to a widening of the refining spread, or crack, for Singapore gasoline. This spread remained wide in Q3 keeping Australian petrol prices elevated.

"The September update of the CPI will confirm that inflation remains neutral for monetary policy. A robust 0.8%qtr rise (1.9%yr) is forecasted in the headline CPI in the September quarter", added Westpac.