Why to NOT be fooled by Australian inflation cooling as expected to 2.7% from 3.5%

🚩 The RBA looks at the trimmed mean, which only fell to 3.4% from 3.8% YoY. That's still above the RBA's target range by the way. And the pull back in trimmed inflation is in line with the RBA saying inflation will only temporarily pull back before rising again. Why? Two reasons: Electricity prices fell 17.6%, supported by federal and state energy bill rebates. Petrol prices fell 7.6% YoY, but spot oil prices are rising again as the two biggest economies (Fed & PBOC) are cutting rates.

🚩 The biggest CPI gainers can't be slowed. Rents are up +6.8%. Insurance costs +6.2%. Fruit & veg +9.6%. They face upward pressures. The RBA says 'consumption' will slow, which should bring down inflation next year. But consumption can't change these dynamics. People need a roof over their heads—landlords won't drop rents, will they? Insurance premiums are rising—will insurers drop premiums? Fruit and veg prices are seasonally rising—will farmers want to charge less?

🚩 Also, consider, spot agricultural food prices are rising amid drought concerns. Wheat prices are up 9% month-on-month, and sugar is up 24%. So food prices will continue to rise.