Well, I am pretty certain I rank as among the nation's most hawkish economic commentators. I have been unrelenting in my warnings about core and headline inflation pressures, and inflation expectations. Today I was comprehensively vindicated on the first two. And there was nowhere to hide. Headline inflation printed at 1.6%, way above the market's forecast of 1.2%, with the year-on-year headline inflation number now +3.3%, which is awkwardly above the RBA target of +2.5% at the start of a cyclical recovery.
But the much more concerning story was around core inflation. The trimmed mean printed at 0.9% (or +3.6% annualised), significantly above the market estimate of 0.6-0.7%. The weighted median printed at +0.8% (or +3.2% annualised), also way above consensus. The average was obviously +0.85% (or +3.4% annualised). Even the CPI ex volatiles measure printed at a stunning +0.9%.
So everywhere the RBA turns, there is evidence that notwithstanding the benefits of a strongly appreciating AUD, which many analysts argued would have a delayed pass-through impact from Q4, thus generating further deflation in Q1, underlying or 'core' inflation in Australia is rising at an exceptionally strong pace.
As I have said many times before, rates are heading up. And sooner than people think.
