There's a change coming to the number that guides the Reserve Bank on interest rates
The Australian Bureau of Statistics is close to finalising an upgrade to its monthly measure of inflation that should give the Reserve Bank the confidence to use this rather than quarterly inflation reports when it sets monetary policy.
The difference between monthly and quarterly inflation was a substantial factor in this week's surprise decision by the Reserve's monetary policy board to hold official interest rates steady.
May's monthly inflation report showed annual inflation falling to 2.1 per cent. It has been within the RBA's 2-3 per cent target band since August last year. But the March quarterly inflation report showed prices up by 2.4 per cent, with underlying inflation just slipping within the RBA's target band.
Bank governor Michele Bullock on Tuesday noted issues around the monthly inflation report as one of the reasons for the bank's decision to keep interest rates unchanged at 3.85 per cent.
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'To the point about the recent CPI data that we saw, a lot of the focus was on the monthly
data and we think that's a little too volatile and not quite representative of what's really going on with inflation,' she said.
At present, the monthly information report updates prices for between two-thirds and 77 per cent of goods and services in any given month, rather than the comprehensive quarterly report.
An extra $156.7 million in the 2023-24 federal budget was given to the bureau to modernise its IT systems, including an expansion of the monthly CPI. That expansion, which includes collecting prices from businesses more often and ramping up its web-scraping processes, is now almost complete.
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