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Australia CPI forecast makes for grim reading after introduction of monthly measure

By Fitri Wulandari

Edited by Jekaterina Drozdovica

15:33, 31 August 2022

A woman in a green jacket is counting banknotes of Australian dollars.
Will introduction of a monthly reading give a timelier glance on inflation data? – Photo: Shutterstock, Kamil Zajaczkowski

The Australian Bureau of Statistics (ABS) announced that it will start reporting inflation data on a monthly basis, rather than quarterly. 

The adjustment, which will commence on 26 October, will align Australia’s consumer price index (CPI) reporting with other nations such as the US, UK, Canada and Japan. 

The ABS said in the statement that the quarterly CPI will continue to be the country’s key measure of inflation 

What will be the impact of the changes in inflation data reporting on Australia CPI forecast, with inflation hitting an over 30-year high of 6.1% in the June quarter? 

Here, we analyse the key differences between the old and new approaches and look at the long-term CPI forecast for Australia.

What is CPI?

The Consumer Price Index (CPI) is a measure of inflation over a given period based on a typical consumer basket of goods. The CPI is calculated either monthly or quarterly, depending on a country’s policy.

The CPI reflects spending patterns and habits of a local population, which may differ around the world. In the US, for example, the CPI tracks spending of urban consumers, who make up 93% of the country’s population. In Australia,  the CPI tracks prices paid by households who are resident in the country’s eight State/Territory capital cities.

A positive CPI means that prices are growing (inflation), while a negative reading indicates that prices are falling (deflation). 

Australian CPI history

Prior to the  Covid-19 pandemic, the Australian CPI fluctuated between 1% and 3% for almost a decade. In June 2020, quarterly inflation fell 1.9% to -0.3% – the largest quarterly fall in the 72 years history of the Australian CPI. It was the third time that Australian inflation has been negative since 1949.

Deflation was driven by the fall in fuel prices amid Covid-19 mobility restrictions, and childcare services deflation that saw 95% decline due to the government's introduction of free childcare during the pandemic. 

Australian CPI inflation, 2014 – 2022
The Australian CPI started to accelerate from June 2021, with annual inflation for the June 2021 quarter increased to 3.8% after a 1.1% rise in the previous quarter. Rising fuel prices and medical services had been the main inflation drivers in June 2021, according to the ABS. 

Crude oil prices rebounded to above the $70 a barrel level in mid 2021, up from $50/bbl in early 2021, as countries gradually lifted restrictions in line with falling Covid-19 cases and increasing vaccination rates. 

The CPI eased slightly to 3% in the September 2021 quarter, but picked up to 3.5% in the December 2021 quarter due to rising costs for new dwellings and fuel. 

In the March 2022 quarter, annual Australia CPI jumped to 5.1%. Surging fuel and new dwellings prices remained the main contributors to soaring inflation in the country. 

Continued shortages of building supplies and labour, heightened freight costs and ongoing strong demand contributed to property price growth, according to the ABS.

The annual CPI of Australia continued to climb, hitting 6.1% in the June 2022 quarter. That’s the highest reading since the December quarter in 1990, when inflation hit 6.9%. 

Introduction of monthly CPI 

The ABS will release CPI numbers for the September 2022 quarter on 26 October. The statistics bureau will also reveal its new monthly CPI reading, which the ABS said is “a timelier measure of household inflation”. The ABS will use the same data collected for the quarterly CPI. 

When combined with quarterly and annual price collections, the new monthly CPI indicator will represent up-to-date price growth for between 62% and 73% of the CPI basket weight, depending on the month in the quarterly cycle, the ABS said in the information paper


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The bureau asserted that the quarterly CPI will remain Australia’s key measure of inflation.

“A key purpose of the quarterly CPI is to inform monetary policy, with the Reserve Bank of Australia (RBA) having an explicit inflation target to "keep annual consumer price inflation between 2%and 3%, on average, over time,” the bureau said.

Starting with the October inflation release on 30 November, the monthly CPI indicator will be published four weeks after the end of the month referenced. The only exception will be the November data, which will be released in January.

The additional release of monthly CPI data will also bring Australia in line with the the International Monetary Fund's (IMF) Special Data Dissemination Standards (SDDS). 

The SDDS establishes guidelines for the compilation of statistics for countries seeking access to international capital markets. Australia and New Zealand are the only two OECD economies that do not publish a monthly CPI. Australia is the only G20 country without a monthly CPI reading.

“The ABS is moving to a monthly series as the rest of the world, outside of NZ, has monthly CPIs and as technology of data collection has improved, the cost of going monthly has come down,” said Justin Smirk, senior economist at Australian Westpac Bank, in an email to 

The ABS noted that the monthly CPI indicator has some deficiencies relative to the quarterly CPI because data collections for the former were not designed specifically for monthly inflation reporting. Due to differences in frequency of price collection and methods used to compile the two readings, there may be discrepancies between the monthly and quarterly CPI.

The monthly CPI indicator “provides a timely, transparent, and public data set on inflationary pressures at a fairly granular level”, said Smirk in a separate note published on 24 August.  

“And while a simple quarterly average of the monthly series produces a reasonable estimate of the quarterly change in the CPI it is not perfect and sometimes it can be quite a miss,” he added.
“However, still less than 50% of the data is available monthly, so it is not a perfect monthly series, rather it is a guide to the upcoming quarterly. So, the quarterly remains the official measure of inflation.”

Meanwhile, Westpac’s report showed that only 43% of CPI data is available on a monthly basis, while the rest is offered every three months or once a year.

“Adjusting the Monthly Indicator to a quarterly profile will require some judgment due to less frequent (quarterly or annual) price adjustments to a significant proportion of the CPI,” Smirk said.

In addition, the monthly indicator will also not produce estimates of the trimmed mean and weighted median.

Australia CPI forecast for 2022 looks grim 

What will be the impact of the additional monthly inflation data on Australia’s CPI outlook? Will it make the Australian CPI forecast grimmer?

“No, it won’t make inflation worse. It uses the same data set as the quarterly series, so (the monthly CPI) will not give a different answer. Being monthly, the change is we get to see the changing trends in inflation a few months earlier than we do with the quarterly,” said Smirk.

In its CPI predictions released in August, Westpac estimated annual inflation in Australia to climb to between 6.3% and 7.6% in the third quarter of 2022 – if materialised, that would be the highest level since 1988. Inflation was expected to gradually ease from 6.4% in the first quarter of 2023 to 3.1% in the last quarter of 2023. 

Westpac predicted Australia CPI to continue dropping to 2.7% by the final quarter of 2024 before picking up to 2.9% in the first quarter of 2025 and climb to 3% in the fourth quarter of 2025, the bank said in its long-term CPI forecast for Australia.

In its Australia CPI forecast for 2022, the Reserve Bank of Australia (RBA) projected that CPI inflation would reach a peak of about 7.75% at the end of 2022, even higher that Westpac’s predictions. It was anticipated that inflation will decrease to 6.25% in June 2023, 4.25% in December and to around the 3% range December 2024, the RBA said in the August statement.

The National Australia Bank’s (NAB)  CPI predictions also expected Australia’s annual inflation to accelerate to 7.5% in the final quarter of 2022, from 7% in the previous quarter. The country’s CPI was forecast to slow, starting from 6.1% in the first quarter of 2023, dropping to 2.9% by the last quarter of 2023. 

In 2024, the NAB predicted Australia’s CPI to continue to drop from 2.6% in the first quarter to 2.3% in the fourth quarter of 2024. 

The bottom line

Monthly or quarterly, Australia CPI forecast looks bleak. Analysts mentioned in this article projected the country’s inflation to hit over 30-year highs at the end of 2022, before easing in the longer term. 

Remember that predictions can be wrong. You should always do your own research before trading. Past performance does not guarantee future returns. And never trade money that you cannot afford to lose. 


What is the current CPI in Australia?

The annual Australia’s CPI stood at 6.1% in the June 2022 quarter. That’s the highest reading since 1990.

How much is the CPI increase for 2022?

Australia’s annual inflation rose to 6.1% in June, from 5.1% in the previous quarter. 

Economists expected the country’s CPI to continue climbing to the 7% range in the final quarter of 2022. Remember, their predictions can be wrong.

How often is CPI calculated?

The Australia Bureau of Statistics calculates and publishes the CPI on quarterly basis, but starting from 26 October, the bureau will also release a monthly CPI reading.

What happens when CPI increases?

The CPI increase means consumer prices – as defined by a basket of typically used goods – are on the rise, which is likely to hurt consumer purchasing power and the overall economy. To keep inflation in check, central banks hike or cut interest rates.

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