Inflation Illusion — Capital Brief

About half an hour after the Australian Bureau of Statistics released its latest monthly inflation figures, Jim Chalmers was on social media and shared the good news.

“Monthly inflation is currently at a four-month low and underlying inflation has hit a six-month low,” he said in a post, adding that “our measures are helping” but that the government is “not complacent” and wants inflation to come down faster.

In his other public communications, he stressed that the Government's other cost of living support, including energy bill relief, was making “a significant difference” in the fight against inflation.

Economists are far less optimistic. And although this is the last monthly inflation data before the Reserve BankThey assume that the central bank will be just as cautious as they are at the EU's September meeting.

One reason for this is that monthly inflation figures are more volatile than previously thought. This problem, which Chalmers himself admits, has recently led to forecasting errors by economists and markets.