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Annual inflation was 6.8 per cent in August, says Bureau of Statistics

Australia recorded an annual inflation rate of 6.8 per cent in August, down from 7 per cent in July, according to brand new data from the Bureau of Statistics. 

The ABS has decided to publish inflation data every month, rather than every quarter.

The move is designed to give economists more regular updates on inflation, as statistical agencies in other comparable countries do.

The ABS will officially launch its new comprehensive monthly inflation data next month, but today it has released partial data for July and August as a taste of what's to come.

In the June quarter, Australia recorded an annual rate of headline inflation of 6.1 per cent, up from 5.1 per cent in the March quarter.

An indicator of quarterly inflation data

Under the new data regime, the ABS's quarterly data will still be Australia’s key measure of inflation.

Its new monthly data will only cover the price changes of around 60 to 70 per cent of the goods in the ABS's consumer price index basket every month.

But the new monthly measure is designed to give economists enough information to help them keep track of how inflation is evolving month-to-month, rather than having to wait three months for an update.

On Thursday, Australian statistician David Gruen said the inflation data released today provided an early indication of September quarter CPI inflation that would be published next month.

"The monthly CPI indicator saw annual inflation of 6.8 per cent in August compared to 7 per cent in July and 6.8 per cent in June," he said. 

"The largest contributors, in the 12 months to August, were new dwelling construction, up 20.7 per cent, and automotive fuel, up 15 per cent.

"The slight fall in the annual inflation rate from July to August was mainly due to a decrease in prices for automotive fuel."

In the year to August, the data show inflation for food and non-alcoholic beverages increased by 9.3 per cent.

Prices rose sharply across most food categories, led by fruit and vegetables, which jumped from 9.1 per cent inflation in June to 18.6 per cent in August.

However, overall, the annual rate of inflation — according to the monthly data — slowed down a little bit between July and August.

It comes after the Reserve Bank began lifting interest rates in May.

It has lifted the cash rate target from 0.1 per cent to 2.35 per cent over the past five months in a bid to squeeze inflation out of the economy.

What do economists think of the new data?

Capital Economics senior economist Marcel Thieliant said the data showed inflation had eased a little in August.

However, he still thinks a surge in utilities prices will lift annual inflation closer to 8 per cent this quarter.

He said it was also important to note that this data was not seasonally adjusted.

The fall in inflation between July and August, he said, was mainly due to the plunge in automotive fuel inflation, which fell from 43.3 per cent in June to 15 per cent in August.

"Fuel inflation will probably slow further in the fourth quarter, despite the expiry of the fuel [excise reduction] today," he said.

KPMG chief economist Brendan Rynne said this monthly inflation data probably added more reasons for the Reserve Bank board to lift the cash rate target by another 50 basis points next week, "noting that the futures market is pricing in a 95 per cent chance of that happening already".

"The ABS data shows while there has been a softening in the annual inflation rate across six price categories … 10 price categories still saw the rate of annual inflation continuing to rise between July and August," he said.

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