AUSTRALIA DATA: Monthly Data Suggest Services Inflation Eased In Q1

February headline CPI rose 0.1% m/m seasonally adjusted to be up 2.4% y/y down from January’s 2.5%, it has been around this point for three months now. Given it continues to be impacted by various state and federal electricity rebates, the focus is on the underlying trimmed mean which moderated 0.1pp to 2.7% y/y and has been under 3% now for three straight months. Q1 data is released on April 30 and the RBA is forecasting core at 2.7%, in line with the monthly data and below the target band’s ceiling, which will be the first time since Q4 2021. The outcome will be a key input into the May 20 RBA decision.

Monthly CPI y/y%

• Sticky services inflation has worried the RBA and Q4 core services ticked up 0.1pp to 4.2% y/y. However, the monthly data is suggesting that it moderated at the start of 2025. It has averaged 3.6% y/y in Q1 to date after 4.2% y/y in Q4. It is not an exact fit with quarterly headline services but signals direction.  

Services CPI y/y%

• Goods and tradeables inflation moderated to 1.3% y/y and 0.9% y/y respectively, while non-tradeables fell to 3.2% y/y from 3.5%.
• CPI ex volatile items and travel moderated 0.2pp to 2.7% y/y and fell 0.1% m/m seasonally adjusted.
• The ABS said that electricity prices fell 13.2% y/y in February down from January’s -11.5% y/y and excluding all government rebates it would have been down 1.2% y/y. The federal scheme has been extended 6 months to end-2025. It also notes that some Victorian households will receive two rebate payments in April.
• Rents moderated to 0.3pp to 5.5% y/y and new dwellings rose 1.6% y/y after 2.0%, the lowest since May 2021.
• Auto fuel prices fell 5.5% y/y after -1.9% but rose 1.9% m/m. Food and beverages eased to 3.1% y/y from 3.3%.