Rex Airlines suspends sales of some routes as trading halt drags on, ASX closes lower – here’s how it happened

Thanks Billy,

I understand your point completely. I’m also absolutely sick of the prices we see in supermarkets. $10 for cheese. $3 for 10 tea bags. It’s a joke. I live on bread and water these days.

But ANZ chief economist Blair Chapman circulated an interesting note yesterday which contained some good insights worth keeping in mind (in light of the RBA’s attempts to reduce inflation).

He said RBA Deputy Governor Hauser recently asked if you administered prices And Control the things you can controlor “Do we need to push the rest of the inflation basket down a little further to bring inflation back to the target level?”

That was an important question.

Mr Chapman then provided some data on this question.

“Unadministered and unindexed inflation has declined significantly and is at levels consistent with the RBA’s target range on a six-month annualised basis, noting that headline inflation averaged below target (1.9% year-on-year) between 2013 and 2019 (Figure 1),” he wrote.

“In contrast, inflation in indexed goods has accelerated over the past year and inflation in administered goods and The services sector has been growing on a six-month annualized basis (despite a slowdown on an annualized basis). This is contributing to the higher inflation impulse we have seen this year.

He continued:

“Prices for unmanaged and unindexed items rose 3.3% year-on-year to Q1 2024, up from a peak of 9.0% year-on-year. Seasonally adjusted unmanaged and unindexed inflation in the two quarters to Q1 2024 was 2.4% annualised, roughly the level the RBA needs to reach the midpoint of its target range if indexed and managed prices rise to or close to their pre-COVID rate.

“Inflation in indexed items was above the RBA’s target range for most of the decade before COVID, while administered prices tended to be above this range until 2018 (Figure 2).

“As Figure 2 also shows, the current pace of indexed and administered inflation is not significantly different from that before COVID.

Mr Chapman said there was little the RBA could do to influence inflation in indexed or administered goods and services without long delays.

“For example, tuition fees are indexed to December of the previous year (and not to December of the last year),” he said.

“The RBA could raise the policy rate to more effectively curb inflation in the rest of the consumer price index, thereby offsetting higher administered and indexed inflation and bringing headline inflation back to target more quickly.”

“But that would likely slow activity in interest rate-sensitive sectors, slow job growth and increase unemployment.”

“In response to Deputy Governor Hauser’s question, we believe that even if the second quarter CPI is slightly above the RBA’s forecasts, the RBA will discount some of the inflation it cannot ‘control’ and that the Board will keep the policy rate steady at 4.35% at its August meeting.”