First, hats off to Westpac (and Bill Evans) for calling the additional seasonality in the data. This is something they have repeatedly raised, and they deserve credit for drawing attention to it. Westpac's Justin Smirk commented today:
"Readers may remember that Westpac has previously highlighted significant residual seasonality within the ABS’s estimates of core inflation. We argued this was because a seasonal adjustment process struggles to deal with a series that has a regular, once-a-year, price adjustment (such as annual changes in school fees). The ABS has acknowledged this issue and changed the way it treats these series."
Second, a congratulations to Matthew Johnson at UBS, who had canvassed a core CPI outcome of 0.6% before the number, and got it exactly right. This would basically give Matt a perfect strike rate for as long as I have been following him. He's my No. 1 inflation gun.
We will need, however, to wait until the 22 September--when the ABS makes further CPI revisions (yep, more coming!)--to make a final judgment on whether this fundamentally alters the rates outlook.
