Westpac is forecasting that the August Monthly CPI Indicator will rise by just 0.1%, with the annual rate expected to lift from 2.8% to 3.1% due to base effects. The modest monthly increase follows the sharp 0.9% rise in July, which was driven by electricity, new dwellings and holiday travel.
Electricity costs remain the biggest uncertainty. Prices surged 13% in July after households in New South Wales and the ACT missed out on rebates that were delayed until August. Westpac expects the rebates to soften some of the impact this month, pencilling in a 3% rise in electricity for August. Even so, the bank warned there is a high degree of uncertainty around the estimate.
Another area of concern is housing. New dwelling prices rose by 0.4% in July as builders scaled back discounts and pushed through increases. Westpac has assumed a smaller 0.2% gain in August, but cautioned that margin rebuilding among builders could continue and remains a clear upside risk to inflation. Rents, meanwhile, are expected to rise steadily at 0.3%.
Other categories are likely to provide more balance. Holiday travel, which jumped 4.7% in July, is forecast to fall by 3.2% in August as seasonal effects unwind. Clothing and footwear are expected to see typical discounting, with garments falling by 0.7%. Auto fuel is tipped to record a slight 0.2% decline after stabilising through the month.
The July report caught many by surprise. Annual inflation rose to 2.8%, above Westpac’s near-cast of 2.3% and market expectations of 2.7%. The stronger outcome prompted debate over whether inflation pressures are proving harder to tame than thought. Westpac, however, stressed that attributing the surprise entirely to electricity risks overlooking shifts in underlying inflation dynamics.
August’s update will again test that assessment. While rebates and seasonal patterns could provide relief, the broader question remains whether sticky price pressures in housing and services will continue into the second half of the year.
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📈 @Westpac forecasts August #CPI rise of 0.1%, annual rate to 3.1%. ⚡ Electricity, housing & rents drive uncertainty, while holiday travel, clothing & fuel ease inflation. 🏠 August update will test price pressure trends. 🔍 #TheIndianSun
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