Economists are tipping a stronger March quarter inflation print to be short-lived as coronavirus-related supply and demand shocks filter through, most notably a decline in holiday travel, fuel prices, house prices and rents.
Consumer Price Index data to be released by the Australian Bureau of Statistics on Wednesday is expected to show a headline rise of 0.2 per cent for Q1 – slowing from 0.7 per cent growth in December.
Year-through inflation should grow from 1.8 per cent to 1.9 per cent.
However, a collapse in oil prices, combined with the introduction of free childcare and the deferral or reduction in some price increases, means year-ended headline inflation to June will likely turn negative for the first time since the 1960s.
RBA governor Philip Lowe indicated as much in the central bank’s economic update last week.
JP Morgan’s Ben Jarman and Tom Kennedy noted the expected March inflation figures had already been marked down considerably since the start of the year on the back of COVID-19-related supply and demand shocks.
National fuel prices ended the January-March period down 6.0 per cent quarter-on-quarter – equivalent to 0.2 percentage points of first quarter CPI – with the depreciation in the Aussie dollar offsetting some of the fall in global energy prices.
Travel and accommodation has been one of the hardest-hit sectors, and JP Morgan expects poor demand will have added to seasonal weakness in price growth early in the year.
Westpac said trimmed mean CPI printed should rise 0.3 per cent for the March quarter and remain flat at 1.6 per cent for the year, still below the RBA’s 2.0 per cent to 3.0 per cent target band.
The ABS will release the inflation data at 1130 AEST on Wednesday.