Australia’s headline CPI rises 0.4% in Q4

Australia's Q4 headline consumer price index (CPI) rose 0.4%, as compared with market's and Westpac's projection of a rise of 0.3%. The nation reported annualised rate of 1.7% y/y, as compared with 1.5% y/y in Q3. The core measures rose 0.5% qtr, in line with market's projection and slightly lower than Westpac's forecast of 0.6% qtr. Meanwhile, the six month annualised pace of core inflation was 1.7%qtr, lower than the band pace for the second consecutive time. Core inflation continues to be on track to decelerate below the Reserve Bank of Australia's inflation band if it carries on at its current pace.

Data for Q4 was mixed with signs of the pass through from a weaker AUD beginning to appear, stronger than projected increase in clothing and footwear that was countered by the weaker data from housing.

Traded goods prices rose 0.5% in Q4 after 0.3% rise in Q3. The traded goods prices indicate that there might be some moderate pass-through impact from the AUD depreciation, mainly for clothing and footwear. Non-traded goods were subdued due to weak housing number that rose 0.4% q/q and 2.3% y/y.

The annual dwelling price inflation decelerated to 5.5% y/y in Q4 from 8.1% in Q2. Certain volatility in dwelling prices in Sydney is expected. Dwelling prices are on a more subdued trend. This can likely lower the outlook for near term headline inflation and also drag core inflation below the bottom of the central bank's inflation band.