Australian Inflation Data Due, But Geopolitical Tensions Cloud Outlook
Sydney, Australia – Australian inflation data for February is set to be released Wednesday by the Australian Bureau of Statistics, but economists warn the figures offer only a snapshot of price pressures before the recent surge in global fuel costs linked to ongoing geopolitical instability.
The data is expected to show a slight easing of annual headline inflation, falling from 3.8 percent to 3.7 percent, largely due to a 2.8 percent decline in fuel costs during the reporting period. However, this reprieve is likely to be short-lived.
“As the sight of petrol prices approaching $3 a litre indicates, it’s the calm before the storm,” the Australian Associated Press reported.
Economists anticipate a significant jump in March inflation, with National Australia Bank senior economist Taylor Nugent forecasting a one percentage point increase to around 4.6 percent, driven primarily by rising automotive fuel prices. He added that higher airfares will begin to impact figures in April for domestic flights and May for international travel. Costs are also expected to rise across transport, logistics, agriculture, packaging, manufacturing and construction in the coming months.
Belinda Allen, Head of Australian Economics at Commonwealth Bank, noted the February data provides a final look at price tracking before the recent escalation of tensions. The Reserve Bank of Australia (RBA) will be closely watching the figures, but the more crucial data will be the March inflation report, due before the RBA’s next meeting in May.
“Luckily for the RBA, March inflation data is due to be released before its next meeting in May and will provide a much clearer impression of the direction of the economy post-conflict,” AAP reported.
The impact of the fuel price spike won’t immediately be reflected in the RBA’s preferred quarterly trimmed mean inflation measure, which excludes volatile items, as the increase occurred late in the quarter. NAB predicts headline inflation will peak at 5 percent in the June quarter.
Money markets are currently betting on further interest rate hikes by the RBA, potentially as early as May, amid mounting inflation expectations.
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