An important revelation quoted below in the RBA's Board Minutes, which reinforces the other good news on the downward revisions to core CPI effected by the ABS's much more expansive seasonality methods (ie, there are two downward changes: first, via better seasonal adjustments; and, second, through more timely expenditure class weights). Subject to the third quarter CPI results--which is a massive rider--this arguably clears away obstacles to the RBA "normalising" the slightly-restrictive cash rate through a very modest reduction of between 25-50bps, should it be so dovishly inclined. Of course, whether the RBA really wants to make such a superficial change is an open policy question given its long-term outlook. My medium-term hawkish views remain unalloyed (I am even more worried about the global price pulse today), and will be most influenced by the third quarter consumer price data released by the ABS later in the month. I am naturally crossing all fingers and toes for a low print:
"The ABS had also updated the expenditure weights in the CPI for the first time in six years, with the new weights to be applied from the September quarter release. The reweighting took account of changing expenditure patterns, including consumers tending to switch their expenditure towards goods and services whose relative prices had fallen (for example, audio, visual & computing equipment). One other significant change was the exclusion of the interest margin measure in the ‘deposit & loan facilities’ category, which had been a source of volatility in inflation outcomes over recent years. If the new weights and seasonal factors had been in operation over the past year, the outcomes for inflation would have been lower than those published earlier. In particular, the staff estimated that underlying inflation over the year to the June quarter would have been 2¼–2½ per cent, rather than 2½ –2¾ per cent."
